What is the difference between Chapter 7 and Chapter 13?

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By:Michael A. Cibik

Chapter 7 is a liquidation bankruptcy. You don’t pay your debts back, but you may have to give up certain property in return. To qualify for a Chapter 7 bankruptcy, you have to meet certain income requirements. If you make too much money, or if you want to keep your property, you can file a Chapter 13 bankruptcy.

Chapter 13 is a reorganization bankruptcy. Under a Chapter 13 bankruptcy, a plan is filed with the court describing how you will repay your creditors. Under your payment plan, you will make monthly payments to the trustee for three to five years. The benefit of filing a Chapter 13 is that you get to keep your property, whereas under Chapter 7 you cannot catch up on missed payments to avoid repossession or foreclosure. Certain debts cannot be discharged in bankruptcy such as alimony, back child support, and certain tax debts. In those cases, repayment plans will be set up with the trustee to help get you caught up.

Whether you file a Chapter 7 or 13 bankruptcy depends on your objective. Chapter 7 usually means you don’t have to pay your debts, but you might not get to keep your property. Chapter 13 lets you keep your property, but you will have to repay your debts.

Michael A. Cibik, Esquire

Michael A. Cibik is a partner at the Philadelphia law firm of Cibik & Cataldo, P.C. He is one of the few bankruptcy attorneys in the Philadelphia area certified by the American Bankruptcy Board.

If you or someone you know is having financial problems, stop worrying and call Michael at (215) 735-1060 for a free consultation.



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