The Difference Between a Chapter 13 and a Chapter 7
Posted: September 9, 2016 by Jeffrey J. Randa
The two most common types of bankruptcies are a Chapter 13 bankruptcy and a Chapter 7 bankruptcy. Although we do not practice Chapter 13 bankruptcies in our office, they still need to be mentioned because if you are not eligible for a chapter 7, you most likely will file a chapter 13.
Chapter 7 Bankruptcy
This is the chapter of bankruptcy that we file here in our office. This form of bankruptcy wipes out your general, unsecured debts. It is also sometimes called “liquidation bankruptcy” or “straight bankruptcy”. Any debts without collateral are considered unsecured. In order for you to file a chapter 7 bankruptcy, you need to first qualify for it. Qualifications are based on what we call the “means test”, and when you call our office, we will give you a consultation right over the phone. And the best part…it’s free. When you call our office, we ask you the necessary questions to make sure you are eligible before we bring you in, and that also gives you the opportunity to ask us any questions that you might have.
The qualification for a chapter 7 is based on income. It is actually based on two things, household size and income, and you must have a limited amount of disposable income left over after paying for necessary things such as mortgage/rent payments, car payments, food, etc. Once we determine that you are eligible, we then bring you in for an appointment to start the process. If we find that you are not eligible to file for a chapter 7 (which most likely means you make “too much” money), then you might want to look into filing a chapter 13 Bankruptcy.
Chapter 13 Bankruptcy
This bankruptcy is called a “reorganization bankruptcy”. It is a repayment plan that is used for debtors who have a regular income and the ability to repay at least a portion of their debt. The repayment plan is designed specifically for that person, addressing their financial ability to pay. You must prove to the court that you will be able to meet your payment obligations once the plan has been set up for you. However, your total amount of debt cannot be too high. So, in order to qualify, you cannot have more than $383,175 dollars of unsecured debt or more than $1.14 million dollars of secured debt.
We know how much of a headache financial problems cause, and that is why your local Eastpointe bankruptcy attorney is going to help you through it. We want to get you back on your feet and out of debt. When you call our office, we will answer any questions you may have, as well as give you a free consultation right over the phone to see if you qualify for Chapter 7 bankruptcy, and if you don’t, we will direct you towards your best option. The Office of Attorney Jeffrey J. Randa is here to help you figure it all out.