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Understanding the Difference Between Chapter 7 and Chapter 13 Bankruptcy

Filing for bankruptcy can mark the beginning of a new chapter in your financial life, but this step will only be fully effective when you file for the type of bankruptcy claim that matches your specific financial situation.

At The Law Firm of Alexandra Lopez, P.A, we will help you assess your assets and debts and identify the correct type of filing for your needs. For your reference, however, below you’ll find a brief summary of the differences between two of the most common types of bankruptcy filings: Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Chapter 7: Fast and Effective

Chapter 7 bankruptcy provides a fast and effective way to discharge all of your debts so that you can quickly move on to the next chapter of your life with a fresh start. But Chapter 7 sometimes comes with a cost: the filer may be required to liquidate some assets to pay their creditors before the remaining debt can be discharged.

In reality, most individuals in Chapter 7 bankruptcies have “no assets” as defined by the Bankruptcy Code, and have nothing of value for the trustee to sell. Our attorney will carefully go over your bankruptcy schedules and explain if you could potentially need to liquidate any assets and Chapter 13 may provide an alternative to Chapter 7.

Chapter 7 is available to both individuals and businesses, but only those under a certain income threshold. We will explain the ‘means tests’ and how it applies to your situation. It may be the best option for people who simply don’t have the means to pay off their debts in the foreseeable future. Chapter 7 provides an effective path to discharge overwhelming debts.

Chapter 13: The Plan is the Key

Unlike Chapter 7 bankruptcy, Chapter 13 allows the filer to retain a significant amount of property and is often used by those who want to keep secured property, such as a home with a mortgage or motor vehicles.

Rather than discharging all debt, Chapter 13 allows the filer to create a repayment plan that lasts from three to five years and allows the repayment items like mortgage arrears during that period, stopping the ‘acceleration clause’ of many mortgage contracts, which triggers the entire sum of the loan to become due immediately. It can also allow you to continue making payments on vehicles, which can be essential to keeping your job.

You may also be able to discharge a substantial portion of unsecured debt, which can allow you to focus on your secured debts and potentially allow you to save a home from foreclosure or your vehicle from repossession.

Get More Bankruptcy Information at an Initial Consultation

To schedule an appointment with The Law Firm of Alexandra Lopez, P.A, call 305-874-7301 or send us an email. From our office in Miami, we represent clients throughout southern Florida and the Florida Keys, including Broward, West Palm Beach and Monroe counties.

We proudly offer bilingual legal services in English and Spanish. Se habla español.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.