Bankruptcy can be confusing. Here’s a general comparison of chapter 7 and chapter 13
Chapter 7
- Most common type of bankruptcy often referred to as complete bankruptcy.
- Usually completed in 3 to 6 months.
- Commonly used to discharge credit card debts, payday loans, lawsuits, repossession deficiencies and medical bills.
- Stops wage garnishments (except child support).
- Can discharge some income tax debts subject to special rules.
- Can jeopardize an operating business.
- Limited help for homeowners facing foreclosure.
- Requires a higher degree of financial hardship than chapter 13.
- Keep all assets in most cases.
Chapter 13
- Very powerful help for homeowners facing foreclosure.
- Does not require debts to be paid in full, most people pay pennies on the dollar.
- Can reorganize and lower car payments.
- Allows a person to retain an operating business.
- Can get rid of a second mortgage if the value of the house is less than what is owed on the first mortgage.
- Can discharge credit card debts, payday loans, lawsuits, repossession deficiencies and medical bills.
- Can discharge some income tax debts subject to special rules.
- Lower upfront cost.
- Lower degree of financial hardship than chapter 7.
- Requires some form of income.
- Greater ability to retain assets than chapter 7.
- 3 to 5 year plans.