Chapter 7 vs Chapter 13 Bankruptcy: Which Should I File?
- Your Finances
- Types of debt
- Your Income
|Chapter 7||Chapter 13|
|Approach||Debt Elimination||Debt Restructuring|
|Summary||Certain debts can be completely eliminated in 3-5 months. Quickest method.||You still make payments to your lenders, but at a much lower and manageable payment schedule that keeps you or your business operating.|
|Who files?||Individuals & Some businesses||Individuals & Sole Proprietor businesses|
|Yes – Immediately put a hold on
most creditors collection activities
|Yes – (same)|
|My Assets||Best for those with few assets.
May need to liquidate some assets.
|Keep your home, vehicle, etc|
Dealing with Debt
|Eliminate all unsecured debt
(loans not backed by assets, like credit cards, medical bills, utilities, etc.)
|Adjusts debts for lower payments. Affordable payment plans with debts gone in 3-5yrs.|
|Income Needed||Best for those with low income||Best for those who can pay living expenses but not their current debts.|
|How long does it take?||3-5 months, depending on your situation||3-5 year plan to pay off debts|
Who can file?
|Pass the means test. A formula to see if your income is low enough, or if you need to file chapter 13.||Must have enough income to meet your new obligations, minus certain expenses.|