The Difference Between Chapter 7 and Chapter 13 Bankruptcy
While there are actually 6 types of bankruptcy, most people that file for personal bankruptcy file for Chapter 7 or Chapter 13. If you are facing the possibility of bankruptcy, then you may be wondering what chapter you should file under. Here is an overview of each type:
Chapter 7
Also known as liquidation bankruptcy or straight bankruptcy, Chapter 7 bankruptcy is the simplest and fastest way to discharge debt. The debtor must simply provide their non-exempt property to their bankruptcy trustee, so that the trustee can sell it and gain partial repayment. Non-exempt property may include:
- Cash
- Bank accounts
- Stocks, bonds, and other investments
- Valuable items
- Family heirlooms
- Expensive instruments or tools (unless the debtor uses them in their profession)
- Second vehicle or home
Debtors can still keep items like clothing, household appliances, pensions, and public benefits. Some things can be kept up to a certain value, such as a vehicle, jewelry, tools of the trade. Once all non-exempt items are sold, the debtor may receive a discharge of their debts.
It is important to note that individuals can only use Chapter 7 bankruptcy if their income is below a certain level. The government uses the means test to determine eligibility.
Chapter 13
Also known as reorganization bankruptcy, Chapter 13 bankruptcy allows debt repayment over 3-5 years. Debtors are not at risk to lose any of their property and can tackle repayment for their secured debts as well. Even some people who qualify for Chapter 7 bankruptcy prefer to file under Chapter 13 because they want to keep their property.
Obtain Guidance from a Colorado Springs Bankruptcy Attorney
If you want to file for bankruptcy, then you should first meet with a lawyer from Torbet Tuft & McConkie, LLC. Our legal team has nearly 70 years of combined experience that they utilize when analyzing your case. You can discuss your goals with our Colorado Springs bankruptcy lawyers and we will do everything we can to find an option that works for you! Call our office as soon as you can to get started.