This blog post will outline the differences between these two bankruptcy options. It is in no way a complete analysis, but rather a short overview. If you are confused and want further explanation of these options, feel free to call me, Peter Milwid, at 303-831-0073 and I would happy to talk it over with you.
In short, a Chapter 7 bankruptcy cancels most debts with a simple procedure that takes about four months to complete, and Chapter 13 is a payment plan bankruptcy with monthly payments based on your disposable income over a period of three to five years.
In my view, the consideration begins with Chapter 7, which is cheaper and faster, and then to Chapter 13 if the problems involved require a reorganization as opposed to simple debt cancellation provide by Chapter 7.
The question becomes: why would someone choose a Chapter 13 if Chapter 7 is easier and cheaper?
There are several reasons, but the answer is that they are really two different tools to solve different types of debt problems.
For example, you cannot file a Chapter 7, only a Chapter 13, if you have filed another chapter 7 within the previous 8 years. To qualify for chapter 7 you must be under a certain income for your family size, if not, chapter 13 may be a good choice to control and protect yourself from creditors. Chapter 13 can be used to pay taxes without further interest and penalties. And Chapter 13 can be used to catch up back mortgage payments or even, in some cases, strip a second mortgage from your property if there is no equity to which it might attach.
In Chapter 7, in rare instances, property might be required to be liquidated to pay debts if it is not protected by exemption laws. Chapter 13 may be used to protect such assets if necessary for an effective reorganization.
Either option begins with the issuance by the Court of an order, the automatic stay, which stops all creditor activity and gives you protection to solve your debt problems while the case is processed.
Mile High Bankruptcy does not file Chapter 13 bankruptcies. I used to file them regularly until 2005 when we narrowed the practice to only Chapter 7.
However, I have many inquiries from people who need Chapter 13 or simply don’t understand the difference, and I have an excellent referral source for these folks if Chapter 13 is what they need.
In my office suites is my colleague, David Hoskins, (720-371-9623) who, while not directly affiliated with Mile High Bankruptcy, is an excellent lawyer, a good guy, and to whom I refer cases if Chapter 13 seems the way to go. He also provides free consultations.
So, if you are having debt problems and don’t know which way to go, call me and I can analyze your situation and help with a Chapter 7 or provide an excellent referral for filing a Chapter 13.
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