Many Texas residents have had a tough year financially. If you count yourself among them, you may be considering your options and trying to find some relief. Chapter 7 and Chapter 13 bankruptcies are both personal bankruptcy types. However, there are some important and notable differences between them. The processes involved in both filings are quite different, and they also have different eligibility requirements.
According to Quicken Loans, once you file for either chapter, something called the automatic stay takes effect. During the stay period, many, but not all, of your creditors must stop contacting you while you work through the details of your case. Chapter 7 and Chapter 13 bankruptcies differ in several distinct ways, however.
Chapter 7 bankruptcies
You must take a means test before moving forward with a Chapter 7 filing. Chapter 7 bankruptcies are available only to those without enough disposable income to reasonably pay back their debts. If you pass the means test and move forward with a Chapter 7 bankruptcy, you may have to liquidate some of your assets before your debts undergo discharge.
Chapter 13 bankruptcies
A Chapter 13 bankruptcy involves reorganizing your debts so that they become more manageable. If you have regular income and your debts fall within certain parameters, you may be able to come up with a payment plan that lets you keep your assets, as long as you stick with the plan.
While every situation is different, you may want to consider Chapter 7 if you have limited assets and no way to pay off your debts within five years. You may want to consider Chapter 13, on the other hand, if you have concerns about losing assets or think you might be able to pay off your debts if given more time.