What are the differences between filing for Chapter 7 and Chapter 13 bankruptcy?

The two most common types of bankruptcy that individuals in California can file for are Chapter 7 and Chapter 13. Although they both have the same purpose of helping individuals reduce or eliminate their debt, they differ in important ways. In Chapter 7 bankruptcy, individuals may be able to eliminate most unsecured debts. This includes credit card debt and medical bills. To qualify for Chapter 7 bankruptcy, individuals must pass the means test, which measures their income and debts. If their income is too high, they may not qualify. In Chapter 13 bankruptcy, individuals propose a repayment plan for a portion of their debt. This typically involves paying a certain portion of debts over three to five years. During that period, creditors are prohibited from taking any action to collect the debt. Once all the payments are completed, the remaining debt is discharged. In Chapter 7 bankruptcy, creditors may seize and sell some of the individual’s property in order to pay back debt. In Chapter 13 bankruptcy, this does not occur as the individual submits a repayment plan and keeps all of their property. Chapter 7 bankruptcy can be completed in a matter of months while Chapter 13 bankruptcy can take three to five years to finish. When considering these two options, individuals should consider the amount and type of debt they have, their income level, and the amount of property they are willing to give up to creditors.

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What are the differences between filing for Chapter 7 and Chapter 13 bankruptcy?

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