The differences between Chapter 7 and Chapter 13 bankruptcy are numerous, but this article is designed to cover some of the biggest differences between a filing under each. The following provides a comparative analysis of the some basic distinctions between each bankruptcy chapter as applied to some typical concerns of debtors.

What Property do I have to Give Up in Bankruptcy?

Chapter 7: Generally all property that is not covered by a bankruptcy exemption must be given up to pay off the debtor’s creditors. It should be noted that there are many exemptions under State and Federal law to be claimed and that frequently many debtors are able to keep all property of minor to moderate value. Some notable exceptions are homes or cars with substantial equity (but not those without equity or minor equity), expensive luxury goods, investments, and anything of high value not covered under an exemption. Talk with an attorney to see if the property you want to protect can be exempted. If an exemption is available, then you will not need to give it up in bankruptcy.

Chapter 13: Generally the debtor gets to keep all of his property, as long as he can make the plan payments allocated the specific creditor in question over the term of the bankruptcy case. This is a major advantage of Chapter 13 bankruptcy, as the debtor gets to keep control of the property as long as he can afford the payments. However, the debtor must continue making all payments under the bankruptcy plan as ordered by the court. If at any time the debtor fails to make payments on the property, control of the property may be lost depending on the situation. In addition, debtors are entitled to claim the same exemptions as they would be entitled to take in a Chapter 7 case.

How Long does Bankruptcy under each Chapter Last?

Chapter 7: Normally lasts 3-4 months from filing until discharge.

Chapter 13: Normally lasts 3-5 years, assuming the completion of a successful plan by the debtor. It is very difficult to make plan payments for 3-5 years and only the most diligent of people will be able to accomplish this task, as it requires living very modestly for a very long period of time. This is a disadvantage of Chapter 13 bankruptcy.

How much will Each Type of Bankruptcy Cost?

Chapter 7: Fees and costs change, but you can generally expect bankruptcy under Chapter 7 to normally be about 30-50% of the cost of a similar Chapter 13 case.

Chapter 13: See above. More expensive than Chapter 7 bankruptcy due to the complexity of the case and the number of attorney hours required.