Understanding The Differences Between Chapter 7 Bankruptcy And Chapter 13 Bankruptcy

Bankruptcy is a legal process that helps organizations and individuals who cannot meet their financial obligations. It allows them to eliminate or repay their debts under the supervision of a bankruptcy court. There are several types of bankruptcy filings, but the most common ones are chapter 7 and chapter 13. Understanding the differences between these two filings can be crucial when considering a debt resolution plan that works for you. At The Law Office Of Calvin Craig, we are committed to providing competent and professional legal representation to North Carolina residents. In this blog post, we will discuss the key differences between chapter 7 and Chapter 13 bankruptcy filings, and guide you on which one might be the best fit for your financial situation.

Chapter 7 Bankruptcy Filing

When filing for chapter 7 bankruptcy, you agree to liquidate all non-exempt assets to pay off your creditors. The court then discharges any remaining eligible debts. This type of bankruptcy is preferable for individuals with little to no income, no assets they wish to keep, and overwhelming unsecured debts like credit card debts, medical bills, and personal loans. Chapter 7 bankruptcy filings are short-lived and can be discharged in just a few months. However, the process may be complicated, especially for individuals with assets they would like to keep or bylaws that prevent asset liquidation.

Chapter 13 Bankruptcy Filing

Chapter 13 bankruptcy is a debt reorganization plan where the court works with the debtor to create a repayment plan over an extended period, typically three to five years. Once the court approves the plan, the debtor will make payments to a trustee who then distributes this money to the creditors listed in the plan. Chapter 13 bankruptcy is ideal for individuals with a stable income and property they would like to keep, like a home or a car. The repayment plan must cover priority debts like taxes and secured debts like mortgage payments. The debtor can keep their assets by repaying a portion of the outstanding debt within five years.

Who Should File For Chapter 7 Bankruptcy?

Chapter 7 is suitable for individuals with little to no property and no disposable income. This type of filing is ideal for wiping out unsecured debts that accumulate over time, like medical bills and credit card debts. If you do not have a stable income and your debts exceed your income or property, you should consider filing for chapter 7 bankruptcy. The creditors will have to stop any collection activities after the bankruptcy is filed, and in most cases, you can discharge all your eligible debts.

Who Should File For Chapter 13 Bankruptcy?



Chapter 13 bankruptcy is preferable for individuals with a steady income they can use to repay their creditors over an extended period of three to five years. If you have secured debts like home mortgages or car loans, filing for chapter 13 bankruptcy can help you keep your assets. Additionally, if you want to stop foreclosure, chapter 13 bankruptcy stops foreclosure proceedings and allows you to make up arrears over time. You can also discharge some unsecured debts like medical debts and credit card debts by making payments through the repayment plan.

Understanding the differences between chapter 7 and chapter 13 bankruptcies can help you decide which option is suitable for your financial situation. At The Law Office Of Calvin Craig, we offer a free consultation that can help you understand your options and make informed decisions. Our experienced bankruptcy attorneys are dedicated to providing reliable and efficient legal representation to North Carolina residents. Contact us today, and let us help you achieve financial freedom.