There are more than a few differences between a Chapter 7 bankruptcy case and a Chapter 13 bankruptcy case. First and foremost, a Chapter 7 case is a “liquidation,” while a Chapter 13 case is a “reorganization.” The following summarizes some of the differences between a Chapter 7 bankruptcy case and Chapter 13 bankruptcy case briefly:
|Chapter 7||Chapter 13|
|Who may file?||Individuals and business entities||Individuals only|
|Restrictions on eligibility||Household income must be below the Utah median; if above median, the debtor must complete the means test.||Must have regular income and cannot have unsecured debt of more than $419,275 and secured debt of more than $1,257,850 as of 4/1/19|
|Length of time to receive discharge||3-5 months||3-5 years|
|Length of time it remains on a credit report||Ten (10) years||Seven (7) years|
|Cost to file||$335 filing fee plus attorney fees||$310 filing fee plus attorney fees|
|Disposition of debtor’s property||Non-exempt property may be sold to pay creditors||Unsecured creditors must be paid an amount equal to the value of non-exempt assets|
Despite the fact that a Chapter 7 bankruptcy is a “liquidation,” a debtor is not necessarily required to sell or liquidate all property upon filing. This couldn’t be farther from the truth. Debtors may “exempt” or keep important assets through the use of exemptions. A Chapter 13 bankruptcy case allows debtors to retain property at the cost of paying any equity in non-exempt assets to creditors.
A chapter 13 bankruptcy reorganization is sometimes called a wage earner’s plan since it enables individuals with regular income to pay all or part of their debts over three to five years in a plan of reorganization. Creditors continue to prohibited from continuing collection efforts during this three to five year period.
Chapter 7 bankruptcy often allows debtors to discharge debts without losing any assets in “no-asset” cases. Chapter 13 bankruptcy allows debtors to reorganize their debts, cure delinquent mortgage or auto loan payments, and pay nondischargeable priority obligations in full through a repayment plan.
Many bankruptcy debtors have a choice between filing a Chapter 7 bankruptcy case and Chapter 13 bankruptcy case. There are many differences between the two chapters. An experienced Morrison Law Group attorney can help you determine which is best for your financial situation. Call 801.456.9933 today to schedule a FREE consultation and discuss your complete set of options. We have locations in Ogden, Logan, Sandy, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.