If you are interested in learning if bankruptcy can help your current financial situation, you may have spoken to an attorney. If you haven’t, then you may need to learn the differences between Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 bankruptcy is often referred to as “liquidation bankruptcy.” Chapter 13 bankruptcy is a payment plan. With Chapter 7, debtors have to pass a “means test.” In most cases, people who make more than the median income in the state they live in won’t qualify. If that happens, then they will need to file Chapter 13. In addition, the debtor must not have had debts discharged from Chapter 7 in the past eight years.
In order to qualify for Chapter 13 bankruptcy, the debtor must not have over $922,975 in secured debt $307,675 in unsecured debt. In addition, the debtor must not have discharged debt in the last four years through a Chapter 7, 11 or 12 or had a Chapter 13 discharged in the past two years.
In a Chapter 7, all but a few specific debts are discharged. Taxes, student loans and child support cannot be discharged. In Chapter 13, a specific plan is developed for repaying debts over a period of time. The same debts that cannot be discharged in a Chapter 7 bankruptcy cannot be discharged in a Chapter 13 bankruptcy.
Just over 71 percent of consumer bankruptcies were Chapter 7. Chapter 13 bankruptcies accounted for around 29 percent.
If you believe that bankruptcy may be an option for you that will let you get back on solid ground financially, a bankruptcy attorney in Fort Lauderdale can provide more information.
Source: American Bar Association, “General Comparison of Chapter 7 and Chapter 13 Bankruptcy,” accessed Dec. 23, 2015