What’s The Difference Between A Chapter 7, 11 and 13 Bankruptcy?

Many people might not know that they have options when it comes to filing for bankruptcy

A chapter 7 bankruptcy is the most common, but it might not be the right option for you. This is why it’s important to meet with a bankruptcy attorney. They will be able to assess your case and advise you on the best course of action, be it a chapter 7, 11 or 13 bankruptcy.

So, what are the differences between these bankruptcies?

Chapter 7:

  1. It is usually over within 6 to 8 months.
  2. It will discharge most of your debts.
  3. You can keep your home or your car, but you have to pay at the same interest rate and terms as before the bankruptcy.
  4. Income limits exclude people who can afford to repay their debts.
  5. You could lose non-exempt property, but most people never do.

Chapter 13:

  1. You will repay a portion of your debts over the next 3 to 5 years.
  2. You pay what you can afford. If, for example, after living expenses you have $200 left over every month, that is what you pay. Your creditors get cents on the dollar for what is owed, and any remaining unpaid debt is discharged.
  3. Debts owed to a former spouse can be discharged in a chapter 13, but not 7 or 11.
  4. You can modify the terms of secured loans. For example, if you have a car that is worth $10,000, but you owe $20,000 on it and pay 18% interest, you can keep it in a chapter 7 but you would owe the full $20,000 and pay at 18% interest. In a chapter 13, we could modify the loan terms so you only pay $10,000 at 4.5% interest.
  5. If you have a home that is underwater, a 13 can eliminate the second mortgage. For example, if your house is worth $150,000, with a first mortgage of $160,000 and a second mortgage of $50,000, we could discharge the second mortgage entirely, so you would only owe the first mortgage.
  6. If you are behind on house payments, we can cure the arrearages over a span of up to 5 years and prevent foreclosure.
  7. You can keep property that you may otherwise lose by filing a chapter 7.

Chapter 11:

  1. This is usually for businesses, but it can be filed for individuals. However, it is rare.
  2. It is basically a chapter 13 on steroids. There are slight differences, but they are very nuanced and complex. If you think a chapter 11 is right for you, it is best to discuss this matter with a skilled bankruptcy attorney.
  3. It is usually only used for high income debtors, as it costs a minimum of $10,000 in attorney fees to file.
  4. It could be your best choice, if you have substantial income or assets.

If you are facing filing for bankruptcy, we always recommend speaking with a professional. As you can see, there are many options and it is important that you get the best representation available to help you choose what will be right for you.

If you are in Western Michigan and are looking to speak with someone about bankruptcy, give us a call at Mapes Law Offices. We have been servicing the area since 2008 and have helped hundreds of clients out of their debt and onto financial stability. With Mapes Law Offices, you not only get a highly skilled bankruptcy attorney, you also receive help and guidance to step toward a brighter financial future. We take pride in our work of helping good people go through bad times. We understand that life can take a turn and we’re here to help. Give us a call today at (616) 719-3847 or schedule your free consultation now.