Macco Law Group, LLP

What are main differences between Chapter 7 and Chapter 13?

What are main differences between Chapter 7 and Chapter 13?

If you face severe financial problems in New York and have begun thinking about filing bankruptcy, you likely have numerous questions. For instance, which type of bankruptcy, Chapter 7 or Chapter 13, is best for you? And how are they different one from the other?

FindLaw explains that while both Chapter 7 and Chapter 13 can offer you advantages, the one you should choose depends on your own situation and what you want to accomplish by your bankruptcy.

Chapter 7

Over 70% of individuals who file bankruptcy file for Chapter 7 for the following reasons:

    • It represents a fairly simple and straightforward procedure.
    • It requires the least amount of time to complete.
    • It gives you an automatic stay during which time your creditors cannot harass you for debt repayment.
    • It discharges virtually all of your consumer debt, including your credit card debt.

On the other hand, you must meet the New York income guidelines so as to qualify for Chapter 7. In addition, if saving your home from foreclosure is your biggest concern, Chapter 13 may well be a better choice for you.

Chapter 13

Chapter 13 likewise gives you an automatic stay period, but unlike a Chapter 7 discharge proceeding, Chapter 13 represents a reorganization procedure that gives you the opportunity to get yourself in a much better financial position over a relatively long period of time, usually three or five years.

The first thing you do after filing Chapter 13 is to renegotiate your debts with all of your secured creditors, including your mortgage holder. Oftentimes this renegotiation process itself results in your debt balances becoming considerably less and your interest rates and monthly payments likewise decreasing.

When you finish renegotiating your debts, you then devise a repayment plan that the court must approve before it can go into effect. Once approved, you then simply work your plan, paying down your debts over time. As for your home, Chapter 13 stops any foreclosure proceedings your mortgage holder already began. Assuming you faithfully pay the new monthly payment you agreed to pay per your mortgage renegotiation and repayment plan, your mortgage lender will not reinstitute foreclosure proceedings against you at the end of your lengthy bankruptcy period.

This is general educational information and not intended to provide legal advice.