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Chapter 7 and. Chapter 13: Which Bankruptcy option is Right for You?
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Chapter 7 vs. Chapter 13: Which Bankruptcy Option Is Best for You?
Chapter 7 bankruptcy is faster and less expensive than Chapter 13 bankruptcy, but it's not the ideal choice for everyone.
by Sean Pyles Senior Writer | Personal financial, debt Sean Pyles leads podcasting at NerdWallet as the producer and host of NerdWallet's "Smart Money" podcast. In "Smart Money," Sean talks with Nerds from the NerdWallet Content team to answer the questions of listeners about their personal finances. With a focus on shrewd and actionable money advice, Sean provides real-world guidance that can help consumers better their financial lives. In addition to answering listeners' financial concerns on "Smart Money," Sean also interviews guests outside of NerdWallet and creates special segments on topics such as the racial gap in wealth as well as how to get started investing, and the background of college loans.
Before Sean lead podcasting for NerdWallet the company, he also wrote about topics that dealt with consumer debt. His work has appeared in USA Today, The New York Times and other publications. When he's not writing about personal finance, Sean can be found working in his garden, going for walks, or walking his dog for long walks. He lives at Ocean Shores, Washington.
Last updated Dec 14th, 2021 at at 4:51 PM PST
Editor: Kathy Hinson Lead Assigning Editor Personal finances, credit scoring managing money and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. In the past, she worked for 18 years at The Oregonian in Portland in positions such as copy desk chief and team director of design and editing. Prior experience includes news and copy editing at various Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in mass communications and journalism at The University of Iowa.
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The bankruptcy process is among the most efficient and fastest ways to find . The majority of people who choose this route are able to file to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. The choice of which is the best one depends on the person's assets and financial goals.
To help you comprehend the distinction in Chapter 7 and Chapter 13 bankruptcy, here's a breakdown of each and the people are the best for. Whichever you decide to go with, it's best if:
Your monthly payments to your consumer debt are greater than 50% of your monthly take-home pay.
You're facing lawsuits from creditors.
You see no way to pay off your debt in five years.
What's what's the distinction in Chapter 7 and Chapter 13 bankruptcy?
The major differences between the two types of. bankruptcy is the conditions for eligibility, how debts are settled and the length of time.
Take a look at this table for an understanding in a glance:
Chapter 7
Chapter 13
Form of bankruptcy: Liquidation.
Form of bankruptcy: Reorganization.
Eligibility:
You have to pass the means test, which looks at your expenses, income and the size of your family.
It is not possible to have had a prior Chapter 7 discharge in the or a Chapter 13 in the past six years.
It is not possible to have filed bankruptcy papers (Chapter 7, 13) within the last 180 days, and it was rejected for a variety of reasons for example, failing to show up in court or to comply with court orders.
Eligibility:
Unsecured debt cannot exceed $419,275, and secured debt can't exceed $1,257,850.
Regular income is required and must have current tax returns.
Could not have filed any Chapter 13 filing in the last two years, or Chapter 7 within the last four years.
You cannot have filed a bankruptcy petition (7 or 13) in the previous 180 days that was dismissed for certain reasons, for example, failing to appear or comply with court or court orders.
How long does it take to get a discharged: It is usually less than six months.
How long it takes to achieve a discharge: Usually, three to five years, based on the repayment program.
The credit report's mark: Remains the credit score for after the date of the filing.
Mark on credit report The mark remains the credit score for after the date of the filing.
Benefits:
A quick methods to resolve overwhelming debt.
Filing a bankruptcy petition halts collection efforts and legal action from creditors.
Benefits:
Can help you resolve your debts while retaining certain assets or getting caught up on secured debts, such as the auto loan or mortgage.
Filing a bankruptcy petition halts the collection process and prevents legal action from creditors.
Drawbacks:
Although it is rare, trustees is able to sell property that is not exempt.
Generally for unsecured debt; is not protected from repossession or foreclosure.
Drawbacks:
The duration and price for the plan are challenging and a lot of filers find it difficult.
Which is better? 7 or Chapter 7 or Chapter 13?
Which form of is best for you will depend on your financial situation and your goals.
For determining whether Chapter 7 or Chapter 13 bankruptcy is best to you . It is important to make sure that your debt problems can be resolved through bankruptcy and you're in a position to benefit from the new beginning bankruptcy offers.
The majority of consumers choose Chapter 7 bankruptcy, which is quicker and less expensive as compared to Chapter 13. Most people who file for bankruptcy qualify in Chapter 7 after taking the examination of the family's income, expenditures and size to determine eligibility. Chapter 7 bankruptcy discharges, or eliminates, debts that are eligible such as credit card bills medical debt, personal loans. However, other debts, such as student loans and taxes, typically aren't eligible. Also, Chapter 7 doesn't offer a option to pay on secured loan repayments, such as the mortgage or auto loan but it does not safeguard these assets from foreclosure or repossession.
In certain instances the bankruptcy trusteean administrator who collaborates in conjunction with bankruptcy courts to represent the estate of the debtor can sell nonexempt items, meaning items that aren't protected during bankruptcy. Nonexempt items are defined according to the law of the state.
Chapter 13 bankruptcy may be ideal for those who don't be eligible for Chapter 7 bankruptcy. Chapter 7 filing, for instance, if their income is too high. And some who qualify to file for Chapter 7 may still choose to apply to file Chapter 13 because they want to protect certain assets or catch up on their mortgage payments. But, Chapter 13 repayment plans are challenging: All leftover income after certain allowances has to be directed toward repaying debt over three up to 5 years.
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Author bios: Sean Pyles is the host and executive producer on the NerdWallet's Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.
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