Chapter 7 vs. Chapter 13
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We are often asked, “What is the difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy?” At Berger, Fischoff, Shumer, Wexler & Goodman, LLP, our bankruptcy team created a simple chart to help explain the basic differences between the two bankruptcy filings.
The difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy:
| Chapter 7 | Chapter 13 | |
| Type of Bankruptcy | Liquidation bankruptcy. Non-Exempt assets are sold by a trustee to cover your liabilities. | Reorganization bankruptcy Debts are paid off through a payment plan. |
| Who Can File? | Individuals or corporations can file. | Individuals can file either single or joint with their spouse |
| How is Eligibility Determined? | Your eligibility is determined by the Means test. Your attorney will review your income and your liabilities with you to determine if you qualify. | Chapter 13 requirements impose a limit on the amount of a filer’s debt. Your attorney will review your total liabilities and your available income to determine if you qualify. |
| How Long Does It Take to Receive a Discharge? | Three to Five Months | Three to Five Years |
| What Happens to Property in Bankruptcy? | Non-Exempt property is sold by a trustee to pay creditors. The balance is wiped out. | You keep your property but you must make payments according to your payment plan. Filing Chapter 13 will save a house from foreclosure because it allows you to pay back the mortgage arrears in equal payments over a period of 60 months. |
| Benefits | A Chapter 7 is designed to give you a “fresh start”. You are discharged from most debts and you can move forward with your financial future. | Debtors can keep their property such as their house and their car. It protects your assets. This plan gives you time to catch up on your payments. |
Please note that this is only a basic overview of the differences between Chapter 7 and Chapter 13 bankruptcies. Bankruptcy law, the criteria that must be met in order to file, and the different implications of filing under Chapter 7 or Chapter 13, are very complicated issues. You want a bankruptcy law firm, like Berger, Fischoff, Shumer, Wexler & Goodman, LLP, that will take the time and have the patience to listen to your individual situation, to determine the best option for you and your family. You want a bankruptcy firm that will protect your assets and put you on the path towards financial solvency. You want well-educated and experienced bankruptcy lawyers to answer your questions, ease your fears, and protect your hard-earned assets.
If you live on Long Island or in the five boroughs of New York city, and are potentially facing foreclosure, repossession of assets, wage garnishment, or other measures of legal action due to amassed debt, or just need to get out from under overwhelming debt, you want the experience and skill of Berger, Fischoff, Shumer, Wexler & Goodman, LLP’s bankruptcy team on your side.
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