If you're experiencing a debt problem, filing a bankruptcy can take a lot of stress and anxiety off of your plate. At LifeBack Law Firm, we assist clients all over Minnesota with filing chapter 7 and chapter 13 bankruptcies. Many potential clients we meet with are curious about the difference between the two, so below is some further information on each chapter of personal bankruptcy.
Chapter 7 bankruptcy is often called the “fresh start” or "liquidation" bankruptcy. It usually is 3-4 months in duration, and you list your assets, creditors, and make some financial disclosures in the bankruptcy petition. You do have to be under a certain median income in order to qualify for a chapter 7 bankruptcy, and we would analyze your income to determine if you are eligible. Chapter 7 is referred to as a liquidation bankruptcy because the primary focus is on your assets. There are exemptions, or protections, that we can use to protect your personal property from your creditors. If there is any property that would not be protected in a chapter 7, your attorney would work with you to determine what options you have.
Chapter 13 bankruptcy, on the other hand, is known as a “reorganizational” bankruptcy. It is a 3-5 year repayment plan; essentially, you consolidate your debts into one monthly payment with a minimum term of 3 years and a maximum term of 5 years. You do not have to liquidate any assets in a chapter 13. Also, a chapter 13 case can also catch up mortgage arrears and pay tax debts, so for some clients filing a chapter 13 is more beneficial than filing a chapter 7. It’s kind of like government-sponsored debt consolidation, but with a few major twists.
- Firstly, in most chapter 13 bankruptcies, you are not paying back the entirety of your debt. Whatever isn’t paid over the payment term is discharged tax-free.
- Secondly, you and your attorney set the payments, whereas in debt settlement the payment is set by the creditors.
CALL NOW FOR A FREE STRATEGY SESSION FROM AN MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM
Choosing the right type of bankruptcy depends on your financial situation, and we can help you determine the best course of action with a free consultation. Whenever you are ready to get your life back, reach out to Minnesota’s kindest and most helpful bankruptcy law firm at www.lifebacklaw.com.
