What Are The Differences Between A Chapter 7 And A Chapter 13?

Under a Chapter 7, you discharge all unsecured debts, although you have to qualify to file for Chapter 7, which means you have to be below a certain income limit based upon the size of your family; if you’re above the income limit for your size family, you have to file a Chapter 13 bankruptcy, which means you will be placed under a payment plan, to and you’ll have to pay back your debts over a 5 year period.

Obviously, if you’re qualified, Chapter 7 is easier because it wipes out most of your debts within a few months, however, you don’t always have the choice. If you’re over the income limit, you have to file a Chapter 13. That said, Chapter 13 will probably look better to creditors because you’re paying down your debts.

What are Other Types of Bankruptcy?

There are certain debt limits that apply in a Chapter 13, so if you exceed those debt limits then you will be required to file a Chapter 11, although almost all Chapter 11 filings involve corporations. There are also special bankruptcy chapters for farms and for railroads and for towns, municipalities; those are very rare.

What Can I Keep When I File For Bankruptcy?

In Connecticut, if you own a home, you have a $75,000 per person homestead exemption, which means, if one person owns the house and the house had $75,000 or less in equity, you get to keep it. If two people own the house, the limit goes to $150,000 worth of  equity. Likewise, as long as the equity in your cars doesn’t exceed the limit for the car exemption you get to keep your cars. There’s also an exemption for clothing and personal property and your 401(k) s, IRAs, pensions, are all exempt and cannot be taken by creditors.

How Much Does It Actually Cost to File A Bankruptcy?

If you don’t own a house my legal fee for a Chapter 7 is $1,800, while it’s $2,800 if you do own one; in addition, the court charges a $300 filing fee and there’s a $30-per-person fee to pull credit reports. For a Chapter 13, there’s a $3,500 legal fee, in addition to the approximately $300 filing fee with the court and the same $30 credit report fee per person. That’s not a lot of money to get rid of a lot of debt, and to have a chance to keep your house and keep paying on your house and eventually in the future decide whether you want to keep your house, if it is worth less than you owe, they can never come after you for any deficiency.

Once you file Chapter 7 bankruptcy your debts are discharged; you can keep paying on your secured loans, like your house and your car, but if any time in the future you decide you want to throw in the towel on a house or a car, or your car is totaled in an accident, they can never come after you in the future for any deficiency, even though you’re continuing to pay the loan.

For more information on Differences Between Chapter 7 & Chapter 13, a free initial consultation is your best next step. Get the information and legal answers you’re seeking by calling (203) 929-7771 today.