3 Key Differences Between Chapter 7 and
 Chapter 13 Bankruptcy

Seeking advice and help from a bankruptcy lawyer is the best way to find out if you qualify to file for bankruptcy, which branch you should choose, and how bankruptcy works. Your lawyer can also help you understand the key  differences between the two most common branches of bankruptcy: Chapter 7 and Chapter 13.

1. The Eligibility Requirements

The first key difference between these two branches is the eligibility requirements. Your lawyer will perform a means test on your income when you arrive to see him or her, and this test will reveal which branches you qualify for. If your income is low enough, you will be eligible to use Chapter 7 bankruptcy, if you wish; but you may also be eligible for Chapter 13.

When a person's income exceeds a certain limit, he or she can only file for Chapter 13 bankruptcy and not Chapter 7. While other factors are involved with your eligibility, your income is the main factor that affects which branch you can use for debt-relief purposes.

2. The Way Each Handles Debt

The second difference is the way each branch treats and handles the debts a person has. The key benefits you receive if you qualify for Chapter 7 is the forgiveness of certain debts. The debts Chapter 7 forgives include most unsecured debts, and the most common unsecured debt is credit card bills.

Through Chapter 7, you can eliminate every credit card balance you owe. Additionally, you can eliminate other types of debts, too, including medical bills and deficits from repossessed car loans.

Chapter 13 may offer some debt forgiveness, but it typically requires repayment of all debts. This is accomplished through a repayment plan that your lawyer will create on your behalf. After creating it, the trustee must review and approve it. If approved, you will pay the trustee each week or month, and the trustee will disperse the funds to your creditors.

When the plan ends, you may still owe money on certain debts, and the trustee might agree to forgive some of this money. Their decision will depend on what the debts are and on other factors, but you must complete the entire plan for the trustee to consider this.

3. The Length of the Plan

The third key difference to understand is the length of each branch. From start to finish, a Chapter 7 case often closes within six months. This means that from the time you file until the case discharges and closes, it will be only half a year. This is a huge benefit of Chapter 7, as it allows you to move on with your life a lot faster.

A Chapter 13 case takes a lot longer than this due to the repayment plan it includes. When you file for Chapter 13 and your lawyer creates a repayment plan, the process can last either for three years or five years. It will never be more or less than this. This means that Chapter 13 bankruptcies can take up to five years to close.

The length of your plan will depend on your income and debts, and your lawyer will review all of this information as he or she creates a plan to propose for you. If you can get a three-year plan, it will help you move on with your life faster, but this is not always possible.

If you cannot pay your debts and keep falling further behind on them, contact Brace W. Luquire. We can help you learn more about bankruptcy,  your options, and the branch that would benefit you the most. Call us  today or schedule a free consultation appointment.