Chapter 7 or. Chapter 13 Which Bankruptcy option is Right for You?

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Chapter 7 and. Chapter 13: Which Bankruptcy Option Is Best for You?
Chapter 7 bankruptcy is faster and cheaper in comparison to Chapter 13 bankruptcy, but it's not the ideal choice for everyone.
by Sean Pyles Senior Writer | Personal financial, debt Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet's "Smart Money" podcast. In "Smart Money" Sean talks with Nerds on the NerdWallet Content team to answer listeners' personal finance questions. With a focus on shrewd and actionable financial advice, Sean provides real-world guidance that will help consumers improve in their finances. Beyond answering listeners' money concerns on "Smart Money" Sean also interviews guests who are not part of NerdWallet and produces special segments to explore topics like the racial wealth gap as well as how to get started investing and the history of college loans.
Before Sean lead podcasting at NerdWallet He also covered issues that dealt with consumer debt. His writing has been featured on USA Today, The New York Times and other publications. When when he's not writing about personal finances, Sean can be found digging around his garden, going on runs and taking his dog on long walks. Sean is located at Ocean Shores, Washington.





Dec 15, 2021


Written by Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team editor and designer. Previous experience included copy editing and news for several Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor's in journalism and mass communications at The University of Iowa.







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The bankruptcy process is among the fastest and most efficient methods to locate . Many people who take this route will file to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Which is best depends on the person's assets and financial goals.
To help you comprehend the distinction in Chapter 7 and Chapter 13 bankruptcy This article will explain the differences between the two types and who they're suitable for. Whatever you select, you must:
Your monthly debts to consumers exceed 50% of your monthly take-home pay.
You're facing lawsuits from creditors.
There is no way to pay off your debt within five years.

What's what's the distinction in Chapter 7 and Chapter 13 bankruptcy?
The main differences of vs. bankruptcy is those of eligibility criteria, the method by which debts are resolved and the duration of time.
Look over this table for an understanding in a glance:
Chapter 7



Chapter 13



Form of bankruptcy liquidation.


Form of bankruptcy: Reorganization.


Eligibility:
You must pass the means test, which evaluates your expenses, income and the size of your family.
Cannot have had a previous Chapter 7 discharge in the or a Chapter 13 in the past six years.
You cannot have filed a bankruptcy petition (Chapter 7 or 13) in the previous 180 days, and it was rejected for a variety of reasons for example, failing to show up in court or to respecting the court's orders.



Eligibility:
Unsecured debt cannot exceed $419,275 while secured debt cannot exceed $1,257,850.
Must have regular income and have current tax returns.
Could not have filed any Chapter 13 filing in the past two years or Chapter 7 in the past four years.
Cannot have filed a bankruptcy petition (7 or 13) within the past 180 days, and it was rejected due to certain reasons, such as failing to appear or comply with the court's order.



How long it takes to get a discharged: It is usually less than six months.


How long does it take to achieve a discharge: Usually, three to five years, contingent on the repayment program.


Mark on credit report It remains on your credit report after the date of the filing.


The credit report's mark It remains on your credit report for the time period from the date of filing.


Benefits:
A quick routes to settle debts that are overwhelming.
Filing a bankruptcy petition halts collection efforts and legal action from creditors.



Benefits:
Can help you resolve your debts while retaining certain assets or being caught up in secured debts, such as the auto loan or mortgage.
The filing of a bankruptcy petition stops collection efforts and legal action by creditors.



Drawbacks:
Though rare, the trustee can sell nonexempt property.
It is generally unsecured debt that it is not protected from foreclosure or repossession.



Drawbacks:
The length and cost of the repayment plan can be an issue for many filers.









Which is better? 7 or Chapter 7 or Chapter 13?
The best option for you will depend on your financial situation and goals.
To determine whether Chapter 7 or Chapter 13 bankruptcy is right for you . You'll want to ensure that your debts are able to be dealt with through bankruptcy and that you're in a position to make the most of the fresh start bankruptcy offers.
A majority of people choose Chapter 7 bankruptcy, which is more efficient and less expensive than Chapter 13. A majority of filers qualify for Chapter 7 after taking the test, which looks at income, expenses and family size to determine eligibility. Chapter 7 bankruptcy discharges, or wipes out, eligible debts like credit card debts as well as medical debts and personal loans. But other debts, like student loans and taxes, typically aren't qualified. Also, Chapter 7 doesn't offer a route to get caught up on secured loan payment, such as the mortgage or auto loan, and it doesn't protect those assets from repossession or foreclosure.
In certain instances bankruptcy trustees -- an administrator who works with the bankruptcy courts to represent the debtor's estate can sell nonexempt items, meaning items that aren't protected during bankruptcy. Nonexempt items vary according to the laws of the state.
Chapter 13 bankruptcy may be better for those who don't qualify for Chapter 7 bankruptcy. Chapter 7 filing, for instance or if their income is too high. And some who qualify with Chapter 7 may still choose to file to file Chapter 13 because they want to keep certain assets or avoid getting caught in mortgage payment. The downside is that Chapter 13 repayment plans are challenging: All available income after allowances has to be directed towards the repayment of debt over a period of three to five years.
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Author bios: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.







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