Go to Top

Chapter 7 vs Chapter 13 Bankruptcy

You may be overwhelmed about the idea of filing for bankruptcy. Understanding your options can ease tension or confusion you may be feeling and help you make the right the decision for you and your family. Read on to learn about the difference between Chapter 7 and Chapter 13 bankruptcy, two of the most common types of bankruptcy.

If you believe that filing for bankruptcy may be an option for you, it is in your best interest to reach out to an experienced Ohio bankruptcy lawyer at Luftman, Heck & Associates. You can call us at (216) 586-6600, or contact us online for a free consultation.

What is Chapter 7 Bankruptcy?

If you have little or no money after paying your basic expenses, you may want to consider filing for Chapter 7 bankruptcy so that you could completely start over. There are a variety of advantages of filing for Chapter 7 bankruptcy. Some of these advantages include:

  • Debt forgiveness- By filing for Chapter 7 bankruptcy, you can receive the opportunity to pay off creditors quickly or discharge the majority of your debt. Most Chapter 7 bankruptcy cases can be completed in less than six months.
  • The chance to rebuild a credit score- While Chapter 7 bankruptcy does wreak havoc on your credit score, you can slowly rebuild it over time.
  • Relief from creditor harassment- If you decide to file for Chapter 7 bankruptcy, a judge will implement an automatic stay on creditors. An automatic stay will require them to stop contacting you.

While Chapter 7 bankruptcy can improve your situation in many ways, there are some drawbacks associated with filing for this type of bankruptcy, including:

  • Some debt may not be forgiven- While bankruptcy discharges unsecured debts which are divided into priority and non-priority categories, there are some debts like taxes, child support, and alimony which are considered priority debts and not usually discharged. Non-priority debts like student loans are not forgiven as well.
  • A low credit score- A Chapter 7 bankruptcy will remain on your credit report for 10 years, lower your credit score, and make it difficult for you to take out a loan or get approved for a credit card.
  • The potential inability to keep your house- In the event you are behind on mortgage payments at the time of filing, your mortgage company may request that they are taken out of your bankruptcy so that they can pursue foreclosure of your home. If you are up to date on your mortgage or have paid off your house, you may get to keep it.

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy may be right for you if you have steady income and can pay your basic expenses but find it difficult to keep up with your debt payments. Chapter 13 bankruptcy can allow you to keep your assets while discharging some or even all of your unsecured debts. Some of the advantages of Chapter 13 bankruptcy include:

  • The opportunity to avoid foreclosure- If you have fallen behind on your mortgage payments, the Chapter 13 repayment plan can give you the opportunity to keep your home.
  • No direct contact with creditors- When you file for Chapter 13 bankruptcy, you can pay a court-appointed trustee rather than paying creditors and having to maintain direct contact with them.
  • The chance to pay off secured or non-dischargeable debts- If you have secured debts like a car loan or non-dischargeable debts like tax debts or child support, you can pay them off at a reduced amount.

Chapter 13 bankruptcy also comes with some disadvantages, including:

  • A repayment plans lasts for three to five years- Since a typical Chapter 13 repayment plan lasts for three to five years, you are locked down with its rules and conditions during that time period.
  • The loss of credit cards- If you file for Chapter 13, you will be ineligible for credit cards for a period of time.
  • Extreme difficulty obtaining a mortgage- In the event that you do not have a mortgage and would like one in the future, you may not be able to get approved for one if you file for Chapter 13.
  • A low credit score- A Chapter 13 bankruptcy will remain on your credit report for seven years and hurt your credit score as a result.

Is Bankruptcy Right for You?

There are several similarities between Chapter 7 and Chapter 13 bankruptcy. They both help individuals publically declare they are unable to pay all of their bills so that they could eventually free themselves of debt. With both types of bankruptcy, you can get a fresh start financially and live a higher quality of life.

To determine whether filing bankruptcy is a good decision for you, it’s imperative that you consult a highly skilled Cleveland bankruptcy attorney at Luftman, Heck & Associates who can evaluate your situation and make recommendations on how you should proceed. Call us today at (216) 586-6600, or contact us online for a free consultation.

Want Debt Relief? There Are Options. Call an Ohio Bankruptcy Attorney Today.

The best way to learn about your bankruptcy options in Ohio and what your options might be is to call an experienced Cleveland bankruptcy lawyer. We serve all of Northern Ohio and would be happy to learn more about your situation and guide you through some of your options. Call or email us at advice@clevelandbankruptcyattorney.com to speak with a Cleveland bankruptcy lawyer today about a Chapter 7 bankrutpcy or Chapter 13 bankruptcy filing with us.
Contact us today!