One of the most common requests we receive in email is from consumers wanting to know the difference between Chapter 7, Chapter 13 and Chapter 11 bankruptcy. First and foremost please understand that we absolutely are NOT trying to advise you on which one is best for your situation. Only you or your bankruptcy attorney can decide that.
What we have done below is provide a basic explanation of Chapter 7
bankruptcy to provide our site visitors with general knowledge on the
process. We have no way to know which of the bankruptcy types would be
best for you, if any, or how it could affect your own personal assets
and since we are not attorneys, we can not answer e-mails or questions
regarding this matter. If you want information on the other chapters,
visit our Chapter 11 Bankruptcy and Chapter 13 Bankruptcy information pages.
This type of bankruptcy is for businesses and individuals who have
little or no income leftover after paying their normal expenses each
month to pay their creditors (rent/mortgage, utilities, car payments,
food, clothing, etc). In a chapter 7 bankruptcy, most unsecured debts
are commonly discharged. Please note the term unsecured (you can visit
our bankruptcy term glossary if you need further information on the terms used above).
While most states do not require you to be living in "poverty" to file
bankruptcy, there is a limit to "normal expenses" and " little or no
money leftover". While you may consider getting your nails done monthly
or a month to month golf club membership a basic expense, it probably
will not be a "basic expense" in the trustee's mind. Be prepared to change your lifestyle, as well as your debt in order to file a Chapter Seven bankruptcy claim.
If you have an excessive amount of money leftover after meeting your
basic expenses each month, the trustee may require you to convert to a
Chapter 13. A Chapter 13 would require you to pay back a portion of
your unsecured debts over time. See our Chapter 13 page for more information.
ADVERTISEMENT
You may also want to note that in almost all cases, student loans
are NOT dischargeable in bankruptcies of any kind. You will need to see
a lawyer for specifics related to your situation, but if a huge amount
of student debt or back is one of the reasons you are considering
bankruptcy, you may wish to re-evaluate your choice. Child support
is another type of debt you usually cannot wipe away by claiming
bankruptcy - along with alimony, certain types of tax debts and several
more. See our page about discharging debts in bankruptcies for more information.
Also be aware that most states have a limit on what you can have in
personal assets to file a Chapter 7 bankruptcy. If you think you can
keep the boat or vacation home that is paid in full while charging off
all the credit card debt, you will need to think again.
Again, we must note that the above is for informational purposes only and is not intended to be used as legal advice. Click here for more information on how you can file bankruptcy or if would like to purchase do it yourself
bankruptcy form software.
Related Articles:
+ Information for business owners who need to claim bankruptcy
+ Is chapter 13 bankruptcy the best option for you?
+ Tips for choosing a bankruptcy lawyer you feel comfortable with
+ Tips for choosing a bankruptcy lawyer you feel comfortable with