What is the difference between Chapter 7 Bankruptcy and Chapter 13?

It is my understading that if we filed chapter 7 7 years ago we can’t file again, but we can file chapter 13. What does chapter 13 do?

Asked on June 11, 2009 under Bankruptcy Law, Washington

Answers:

M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

The most familiar type of bankruptcy, in which many or all of your debts are wiped out completely in exchange for giving up your nonexempt property is a Chapter 7 bankruptcy.  It takes from three to six months, costs about $200, and commonly requires only one trip to the courthouse.

The reorganization bankruptcy for consumers, in which you partially or fully repay your debts, is a Chapter 13 bankruptcy.  With a Chapter 13 you keep your property and use your income to pay all or a portion of the debts over three to five years.  The minimum amount you must pay is roughly equal to the value of your nonexempt property.  In addition, you must pledge your disposable net income -- after subtracting reasonable expenses -- for the period during which you are making payments.  At the end of the three-to five-year period, the balance of what you owe on most debts is erased.

For more information on Chapter 13, I've provided a link that can explain it in further detail:

http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter13.html

 


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