How Are Chapter 7 and 13 Bankruptcies Similar?
If you explore bankruptcy options, you may quickly recognize that there are marked differences between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy, as one involves the (almost) complete discharge of your debts, while that the other involves a restructuring of your debt payments. in order to meet your obligations on a lasting basis. While there are many clear differences between these two options, there are also a variety of similarities that you can consider when trying to decide which bankruptcy is best for you.
The most important thing to do when considering your bankruptcy options is to work with a bankruptcy lawyer who can understand all the information needed to make that decision. As you may already know, the results of each type of bankruptcy are very different and can either lead to the elimination of most of the debts or simply to pave the way for a sustainable repayment plan in order to satisfy most, or all of your creditors.
Read more below to learn more about some of the common overlaps between Chapter 7 and Chapter 13 bankruptcies, although they are certainly both very different.
Chapter 7 and Chapter 13 bankruptcies trigger automatic stay
While Chapter 7 eliminates your debts while Chapter 13 restructures them, you will be able to enjoy what is called an “automatic stay” when you file either. This stay means that your creditors are not able to contact you about the collection of existing debts while the order is in effect and can be sanctioned by the courts if they violate the stay. In addition, this stay will put an end to any garnishment of wages to which you have been subject, which means that you will be able to keep all of your earnings during this period.
The length of your automatic stay depends on a variety of factors, including whether or not you’ve ever filed for bankruptcy, and if so, for how many bankruptcies you’ve already filed.
The two bankruptcies are looking for ways to satisfy the existing debts
Filing for bankruptcy isn’t just like waving a magic wand and all your existing debt is gone. Chapter 7, or liquidation, bankruptcy, is typically used by a person who does not have the financial means to repay their debts, and instead their assets will be used to alleviate at least some of the qualifying debt before to waive the balance. This could include selling personal property and liquidating assets to pay off your creditors.
Chapter 13 is a good option when trying to avoid foreclosure on your home, repossession of a vehicle, or to protect any other asset from auction in order to pay off your creditors.
Filing for bankruptcy isn’t just like waving a magic wand and all your existing debt is gone.
Both options are available for individuals or businesses
Whether you are an individual or declaring bankruptcy for a business, you will be able to choose between Chapter 7 and Chapter 13 (Chapter 11 is also available for businesses, but not for individuals). Again, the differences between Chapter 7 and Chapter 13 are present whether you are an individual or a business, which means that you will be making the decision between liquidating your business or restructuring business agreements, or liquidating personal assets or restructuring. debt payments in order to keep your property.
Of course, these options have very different results depending on whether they are applied to an individual or a business, and you will need to work with your lawyer to develop a comprehensive understanding of what each filing will mean for you.