What is the difference between chapter 7 and chapter 13?
|What property do I keep?||Only Exempt property, which usually means necessities. A Trustee appointed by the court will sell the rest of your property to pay people you owe (your Creditors).||All of your property. You pay your debts out of future income.|
|How much time does it take?||Two to three months.||Three to five years. During this time, you will be paying people you owe a portion of what you owe them.|
|How much does it cost?||$306 to file the papers (the Petition) with the court. You should hire a lawyer, and you will also have to pay that lawyer’s fees, which will depend on the lawyer.||$281 to file the papers (the Petition) with the court. You should hire a lawyer, and you will also have to pay that lawyer’s fees, which will depend on the lawyer.|
|What happens to my credit report?||Stays on your credit report for 10 years.||Stays on your credit report for 7 years.|
|What happens to my retirement account or pension if I file for bankruptcy?||You will be allowed to keep it.||You will be allowed to keep it.|
Chapter 7: A Brief Overview
Chapter 7 bankruptcy is liquidation. That means that a bankruptcy trustee will sell ("liquidate") certain property that you own at the time you file the bankruptcy case. The trustee uses the proceeds of the sale to pay creditors. In most cases, you will not have any assets that the trustee can sell because of state and federal laws that may allow you to keep necessities. These laws are called "Exemption Laws" and the property that the trustee may sell is known as "non-exempt" property. If all of your property is Exempt, the trustee will not sell any of your property.
About 90 days after you file chapter 7, most of your debts will be discharged, if yours is the typical case. This means you are no longer liable to pay the debt. Some debts are not discharged, however, and you still must pay them. Examples include past-due child support payments, some taxes and student loans. Debts for which you have pledged Collateral (such as cars, homes and household goods) also do not go away entirely in a bankruptcy.
Filing for bankruptcy allows you to discharge only the debts you list at the time of the bankruptcy case (your "pre-petition" debts). You must pay debts you incur after the filing the bankruptcy case as usual. You may keep the money that you earn after filing a chapter 7 bankruptcy cases, as well as most other property that you obtain after the filing.
Chapter 13: A Brief Overview
Chapter 13 is very different. If you file under chapter 13, you may keep your property and you agree to pay your debts over time from your income, pursuant to a court-approved plan. The amount that you will repay to creditors under the plan will vary based on your particular circumstances.
The payments you make to creditors under the plan must total at least as much as creditors would have received if you filed a case under chapter 7. The payments are made to a trustee, who distributes the payments to the creditors.
The plan usually lasts until the end of a three- to five-year period. Your lawyer can tell you whether you will have to pay over three or five years. You receive a discharge at the completion of the plan.
This was just an overview. More detail is provided throughout this FAQ.