Chapter 7 and Chapter 13 are both forms of debt relief set out in the United States Bankruptcy Code. Chapter 7 and Chapter 13 are the most common forms of bankruptcy utilized by individuals who are facing unmanageable consumer debt like credit cards, overdue car notes, missed mortgage payments, and debt crises such as foreclosures, wage garnishments and vehicle repossessions. However, Chapter 7 and Chapter 13 serve fundamentally different purposes.
An experienced Orlando area bankruptcy lawyer is your best resource to learn more about the consumer bankruptcy filing process and whether Chapter 7 or Chapter 13 makes sense for you. Here are some basic points to help you understand the differences between these two types of bankruptcy:
Chapter 7 eliminates debts, whereas Chapter 13 serves as a 3 to 5 year payment plan to pay debts back. If you are looking to “start over” and wipe out as many monthly obligations as you can, Chapter 7 may be a good option for you. Generally you can only qualify for Chapter 7 if your household income falls below a set number. Chapter 7 can do the following:
- eliminate credit card debts
- cancel without financial obligation a car purchase agreement or lease for a vehicle you can no longer afford
- cancel a home mortgage without further financial obligation
- stop a wage garnishment and eliminate the underlying debt
- cancel an unwanted apartment lease
- eliminate financial obligation to furniture companies, jewelry companies and other secured creditors
- stops harassing phone calls and letters
Chapter 13 functions as a 3 to 5 year payment plan. It is designed to help you keep your secured property such as your house or vehicle, even if you are months behind with payments. Many of our clients turn to Chapter 13 to stop a pending foreclosure and repay missed mortgage payments over time. Chapter 13 also works well if your household income is too high to qualify you for Chapter 7. Chapter 13 can do the following:
- stop a foreclosure and provide you a 3 to 5 year payment plan to catch up your missed mortgage payments
- stop wage garnishment and give you time to pay back your bills, often without interest
- stops harassing phone calls and letters
Depending on your income and property ownership situation you may qualify for Chapter 7, Chapter 13 or both. Clark & Washington’s experienced bankruptcy lawyers are ready to advise you about your bankruptcy options, and there is never a charge for the initial consultation.