The Difference between Chapter 7 and Chapter 13 Bankruptcy

By Cynthia Podis

Nashville Bankruptcy Lawyer

Chapter 13 Bankruptcy is a repayment plan that lasts between 3 to 5 years versus a Chapter 7 Bankruptcy which wipes out debts without repayment. In Chapter 13 and Chapter 7 bankruptcy, you must list all of your debts and assets in the Bankruptcy Petition (forms filed with the court). Both Chapter 13 and Chapter 7 bankruptcy cases have a Meeting of Creditors where a Bankruptcy trustee reviews the forms and asks questions concerning what you intend to do with certain debts and assets, like cars, houses and other secured items.

You can keep a house, car, or other secured items in a Chapter 7 bankruptcy if you do not have equity over the amount allowed under the Bankruptcy exemptions. In a Chapter 13 bankruptcy, you can keep a house, car, or other secured item, regardless of the value as long as your plan meets the best interest of the creditors test and you can afford the repayment plan.

Chapter 7 filers must meet certain criteria in order to qualify for a discharge in their case. Most importantly, you must not have the ability to repay the debts listed and have a household income less than that in the Means Test (found at https://www.justice.gov/ust/means-testing/20161101 ). In Tennessee for a household of 1, income should be less than $42,731; a household of 2 should be less than $53,216; income for a household of 3 should be less than $59,294, etc. If you are over the Means after reasonable deductions are taken, you will not qualify for Chapter 7 relief.

You can file a Chapter 13 bankruptcy even if your income is less than the Means Testing numbers, so long as you can afford the repayment plan which would be between 0% and 100% depending on your financial circumstances.

Chapter 7 has no debt limit, no matter how much you owe, you are not stopped from filing if you meet the other requirements under the Bankruptcy Code.

Chapter 13 limits unsecured debt to $394,725 and secured debt (house, cars, furniture loans) to $1,184,200. If you owe more than the debt limit in either secured or unsecured debt, you cannot get relief under a Chapter 13.

Most clients file a Chapter 13 bankruptcy to keep items they cannot protect under a Chapter 7 bankruptcy or to catch up on house or car payments. Clients file Chapter 13 bankruptcy to allow them to get out from under the stress of overwhelming bills and set up a repayment plan that allows them to enjoy their lives while keeping their assets.

 

For more information, visit www.BankruptcyNashville.com or call 615-399-3800 and schedule a free appointment with us!

Podis and Podis, 1161 Murfreesboro Pike Suite 300, Nashville, TN 37217

We are a debt relief agency. We help people file for bankruptcy under the Bankruptcy Code.