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Chapter 7 vs. Chapter 13: Which Bankruptcy Choice is Best for You?
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Chapter 7 and. Chapter 13: Which Bankruptcy Option Is Best for You?
Chapter 7 bankruptcy is faster and more affordable as compared to Chapter 13 bankruptcy, but it's not the ideal choice for everyone.
By Sean Pyles Senior Writer | Personal finances, 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 questions from listeners regarding their personal finances. With a focus on shrewd and practical money tips, Sean provides real-world guidance that will help people improve their financial lives. In addition to answering listeners' financial concerns on "Smart Money" Sean also interviews guests outside of NerdWallet and creates special segments to explore topics such as the racial wealth gap, how to start investing, and the history of student loans.
Before Sean was the host of podcasting for NerdWallet He also covered issues that dealt with consumer debt. His work has appeared throughout the media including USA Today, The New York Times and other publications. When Sean isn't writing about personal finance, Sean can be found playing in the garden, taking runs and taking his dog for long walks. He is based at Ocean Shores, Washington.
Last updated Dec 14th, 2021 at, 4:51PM PST
Editor: Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team editor and designer. Prior experience includes editing copy and news for several Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in journalism and mass communications from Iowa's University of Iowa.
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Bankruptcy is one of the most efficient and fastest methods to locate . The majority of people who choose this option are able to file in 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 difference in Chapter 7 and Chapter 13 bankruptcy This article will explain the differences between each type and whom are the best for. Whichever you decide to go with, it's best if:
Your monthly consumer debt payments are more than 50% of your monthly take-home earnings.
You're facing lawsuits from creditors.
There is no way to pay off your debt within five years.
What's different between Chapter 7 and Chapter 13 bankruptcy?
The most significant differences between bankruptcy and. bankruptcy are the conditions for eligibility, how debts are resolved , and the length of time.
Take a look at this table to get an understanding in a glance:
Chapter 7
Chapter 13
Form of bankruptcy liquidation.
Form of bankruptcy: Reorganization.
Eligibility:
You must pass the mean test, which evaluates your income, expenses and the size of your family.
Cannot have had a previous Chapter 7 discharge in the or Chapter 13 in the past six years.
You cannot have filed a bankruptcy petition (Chapter 7 or 13) in the previous 180 days that was dismissed for certain reasons, such as failing to appear in court or comply with court order.
Eligibility:
Unsecured debt can't exceed $419,275 and secured debt must not exceed $1,257.850.
Regular income is required and must be current on tax filings.
It is not possible to have had a Chapter 13 filing in the past two years or Chapter 7 within the last four years.
Cannot have filed bankruptcy (7 or 13) in the previous 180 days that was dismissed due to certain reasons, such as failing to appear or comply with court or court orders.
How long does it take to obtain a discharge? It is usually less than six months.
How long does it take to get a discharged: Usually between three and five years, contingent on the repayment plan.
The credit report's mark The mark remains the credit score for the time period from the date of filing.
The credit report's mark: Remains the credit score the time period from the date of filing.
Benefits:
The fastest ways to resolve overwhelming debt.
A bankruptcy petition can stop collection efforts and legal action from creditors.
Benefits:
It can help you settle your debts while retaining certain assets or being caught up in secured debts, such as the auto loan and mortgage.
The filing of a bankruptcy petition stops the collection process and prevents legal action from creditors.
Drawbacks:
Although rare, the trustee may be able to sell property not exempt from taxation.
The general rule is that unsecured debt is not protected from foreclosure or repossession.
Drawbacks:
The length and the cost of the repayment plan are an issue for many filers.
Which is better: chapter 7 rather than Chapter 13?
Which form of is best for you depends on your financial situation and objectives.
To decide if Chapter 7 or Chapter 13 bankruptcy is best to you . You'll want to ensure that your problem debts are able to be dealt with through bankruptcy, and that you're in a position to make the most of the new beginning bankruptcy can provide.
A majority of people choose Chapter 7 bankruptcy, which is quicker and less expensive than Chapter 13. Most bankruptcy filers are eligible to file Chapter 7 after taking the test, which looks at the family's income, expenditures and size to determine the eligibility. Chapter 7 bankruptcy discharges, or erases, certain debts such as credit card bills medical debt, personal loans. But other debts, like student loans and tax debts, generally aren't qualified. Additionally, Chapter 7 doesn't offer a option to pay on secured loan repayments, such as an auto or mortgage loan but it does not safeguard these assets from foreclosure or repossession.
In some instances, a bankruptcy trustee -an administrator who cooperates with bankruptcy courts to manage the estate of the debtor can sell nonexempt items, which means belongings that are not covered by bankruptcy. Nonexempt items are defined according to state law.
Chapter 13 bankruptcy may be ideal for those who don't qualify for Chapter 7 bankruptcy. Chapter 7 filing, for instance or if their income is excessive. Some who are eligible with Chapter 7 may still choose to apply to file Chapter 13 because they want to protect certain assets or avoid getting caught up on their mortgage payments. But, Chapter 13 repayment plans aren't easy: all available income after allowances must be directed towards the repayment of debt over three or five years.
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Author bios: Sean Pyles is the director of production and host for NerdWallet's Smart Money podcast. His writing has appeared on The New York Times, USA Today and elsewhere.
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