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Chapter 7 Compared to Chapter 13

What's the difference?

Most individuals file either a Chapter 7 (also called "fresh start" or "liquidation") or a Chapter 13 (also called "personal reorganization"). Some indicators for Chapter 7 or 13 and a few "pros and cons" are:

Type

Indicators

Pros

Cons

Chapter 7

Heavy credit card; signature loans; medical debt. Monthly income is less than monthly living expenses.

Many debts can be forgiven outright without any repayment requirements. Only takes at few months.

Limit on how much property you can keep -- may have to give some assets to your creditors

Chapter 13

Foreclosure of home; IRS levy; significant assets you don't want to lose in a Chapter 7. Monthly income usually more than monthly living expenses.

Keep your property, save home from foreclosure, and control IRS with reduced monthly payment plan -- usually for 3 - 5 years.

Limit on how extravagantly you can live; must tighten belt. Excess income each month must be paid to creditors.

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