Chapter 13 and Chapter 7: What’s the Difference?
One of the biggest differences between Chapter 13 and Chapter 7 is the statement they make to the court. People who file Cahper 13 basically state that they can pay all their debts, but they cannot pay them at once, and they need a payment plan. Chapter 7 files essentially state that they cannot pay their debts, and the court may liquidate all their nonexempt assets to pay those debts. More on that below.
Chapter 13 and Chapter 7 are similar in many respects. The Automatic Stay immediately stops most creditor adverse actions, such as wage garnishment and foreclosure. Additionally, property exemptions shield most property, such as a house, car, and retirement account, from seizure.
These two forms of bankruptcy are similar in another way as well. To maximize your fresh start, you need a Chicago bankruptcy lawyer. Attorneys strategically fill out the complex paperwork and give you an edge. Furthermore, the Bankruptcy Code includes many legal loopholes that only an experienced lawyer knows about and can take full advantage of.
Chapter 13
Most people qualify for Chapter 13. Their unsecured debt total (credit cards, medical bills, etc.) must be under $400,000, and their secured debt total (mortgage, auto note, etc.) must be under $1.2 million. These figures include current and past due amounts.
Usually, the Automatic Stay takes full effect the moment debtors file their Chapter 13 petitions. Section 362 of the Bankruptcy Code has a lesser effect in a few cases. Additionally, a Chicago bankruptcy lawyer must ensure that all interested parties receive actual notice of the filing. This requirement can be tricky. For example, a past-due auto loan usually involves at least three parties (bank, loan services, and repo company).
About six weeks after they file, debtors and their Chicago bankruptcy lawyers meet with bankruptcy trustees (people who oversee cases for judges). The trustee works with the debtor on an income-based repayment plan. The protected repayment period is three or five years. The monthly debt consolidation payment must pay all allowed claims, mostly past-due amounts on secured debts, before the clock hits zero.
When the judge closes the case, the judge usually discharges all remaining unsecured debts as well. So, when they complete Chapter 13, debtors get a fresh start.
Chapter 7
This form of bankruptcy is much shorter. Most judges close most Chapter 7 bankruptcies within six or eight months.
Most people qualify for Chapter 7. Their household income must be below average for that size family in that geographic area. As of May 15, 2024, the government-designated median income for a family of four in Illinois was $125,022. Some income exceptions and exclusions apply in some cases.
At the aforementioned trustee meeting, a Chapter 7 trustee verifies the debtor’s identity and looks for any red flags in the paperwork. Assuming the trustee gives the debtor a clean bill of health, the judge usually closes the bankruptcy without requiring a hearing.
Chapter 7 normally doesn’t affect secured debts. But it does discharge most unsecured debts. “Discharge” basically means the judge rubs out the legal obligation to repay a debt.
Connect With a Hard-Hitting Cook County Lawyer
No matter what kind of financial problem you are having, bankruptcy could be a way out. For a confidential consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters throughout the Prairie State. So, when they complete Chapter 13, debtors get a fresh start.
Chapter 7
This form of bankruptcy is much shorter. Most judges close most Chapter 7 bankruptcies within six or eight months.
Most people qualify for Chapter 7. Their household income must be below average for that size family in that geographic area. As of May 15, 2024, the government-designated median income for a family of four in Illinois was $125,022. Some income exceptions and exclusions apply in some cases.
At the aforementioned trustee meeting, a Chapter 7 trustee verifies the debtor’s identity and looks for any red flags in the paperwork. Assuming the trustee gives the debtor a clean bill of health, the judge usually closes the bankruptcy without requiring a hearing.
Chapter 7 normally doesn’t affect secured debts. But it does discharge most unsecured debts. “Discharge” basically means the judge rubs out the legal obligation to repay a debt.
Connect With a Hard-Hitting Cook County Lawyer
No matter what kind of financial problem you are having, bankruptcy could be a way out. For a confidential consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters throughout the Prairie State.
Source:
uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/process-bankruptcy-basics
