Understanding the Differences between a Chapter 7 and Chapter 13 Bankruptcy
Definitions of Chapter 7 and Chapter 13
Under Title 11 of the US Bankruptcy Code, a Chapter 7 bankruptcy allows a debtor’s debts to be liquidated. Both businesses and individuals can file a Chapter 7 if they become unable to pay their financial obligations and want to terminate their business operations as well as walk away from their debts. In contrast to this, Chapter 13 is also listed under Title 11 of the US Bankruptcy Code and allows the individual to undergo a reorganization of their financial obligations and repay them over a period of no less than 3 years and no more than 5 years.
The Primary Differences
All outstanding debt is eliminated by virtue of filing a Chapter 7, and it will also stop the Florida foreclosure process so that you can at least sell your home if you wish or just walk away from it without incurring any further financial penalties. This debt elimination will involve the individual’s assets (except certain personal belongings such as household necessities and clothing). These assets are then sold in order to settle the debts and in some cases, you may even be able to keep your home.
Conversely, an individual is not looking to discharge their assets to pay their financial obligations when filing a Chapter 13 bankruptcy. Instead, they are attempting to arrange (reorganize) as well as agreeing to a repayment plan that will satisfy their creditors and enable them to retain their assets in the process. With a Chapter 13, you are allowed to keep your home provided you follow the agreed upon repayment plan.
Another key difference involves the time frame of the Chapter 7 and 13. A Chapter 7 will take approximately 90 days to be final whereas a Chapter 13 can take anywhere from 3 to 5 years. However, the bottom line is that your assets, including your home, are used to satisfy the indebtedness to your creditors whereas a Chapter 13 allows you to pay off those debts over time and not lose any of your assets. As with a Chapter 7, a Chapter 13 can be used to stop the Florida foreclosure process as well.
How can Clark & Washington Help You?
Our firm is mid-Florida’s largest bankruptcy filer and our experienced Orlando Bankruptcy attorneys are well versed in the US Bankruptcy laws. If you need further information regarding Chapter 7 or 13, or if you would like to determine which one would be more suitable for your circumstances, please call us at (407) 898-0299 or you can fill out the confidential contact form found on this website.
