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Bankruptcy: Chapter 7 vs. Chapter 13

Consumers generally have two choices when it comes to filing bankruptcy: Chapter 7 bankruptcy or Chapter 13 bankruptcy.  This article explains each chapter.

Chapter 7 bankruptcy, commonly referred to as the “liquidation bankruptcy,” is by far the most common type of bankruptcy.  From start to finish, this bankruptcy tends to last about 90 days, and provides consumers with a fresh financial start.  Common debts that are dischargeable include medical bills, credit card bills, civil judgments, deficiencies due to repossessions or foreclosures, and many other types of debts.  To qualify for Chapter 7 bankruptcy relief, consumers must pass a means test that is based on level of income and household size.  If consumers do not pass the means test in chapter 7 bankruptcy, consumers will need to file a chapter 13 bankruptcy if they seek bankruptcy relief.  A chapter 7 bankruptcy filing will remain on a consumer’s credit report for 10 years.  A consumer can file a chapter 7 bankruptcy every 8 years.

Chapter 13 bankruptcy, commonly referred to as a “wage-earner’s plan” or a “reorganization bankruptcy” is a more appropriate form of bankruptcy relief in many cases.  Chapter 13 bankruptcy reorganizes a consumer’s financial obligations, and requires monthly payments for 3 to 5 years.  This form of bankruptcy is useful for stopping a foreclosure and catching up on mortgage arrears,  paying down tax debt or child support arrears, catching up on car payments, cramming down the loan amount on a car, and so on.  In some instances, a consumer may be required to file a chapter 13 bankruptcy, if the consumer is ineligible to file a chapter 7 bankruptcy due to high income or a chapter 7 bankruptcy was filed less than 8 years prior.  A chapter 13 bankruptcy will be reported on a consumer’s credit report for 7 years.


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Tom Butcher, Attorney At Law

Tom Butcher is the owner and attorney at Butcher Law Office, LLC. He represents clients in financial distress in Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Tom offers a friendly, respectful, and compassionate experience for clients who are in financial and legal distress. Rather than taking a mechanical approach to filing bankruptcy for clients, like other bankruptcy firms, Tom strives to offer a personal, one-on-one experience, where the client’s situation is of utmost importance. Tom believes this personal attention keeps him connected to the community, and serves his clients best during their bankruptcy.
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