What is the difference between Chapter 7 and Chapter 13 bankruptcy in Washington?

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Question:

What is the difference between Chapter 7 and Chapter 13 bankruptcy in Washington?

Answer:

Washington bankruptcy has two personal bankruptcy options, chapter 7 and 13. The requirements to file either bankruptcy chapters include attending pre-bankruptcy credit counseling and gathering the required paperwork like tax returns and deeds. However, the difference between chapter 7 and 13 is whether you pay your creditors or not. With chapter 13, often called a wage earner’s bankruptcy, is for people with regular income who want to pay unsecured and secured debts. Therefore, people can catch up on their secured debts mortgage payments and auto loans. The U.S. Bankruptcy Courts creates a specific repayment plan that allows people to pay creditors over a three to five year period. However, chapter 7 is for individuals with unstable or no income, but a lot of unsecured debts. Chapter 7 wipes out unsecured debts such as medical bills and credit card payments. This means that individuals won’t have creditors.

Another difference between chapter 7 and 13 is the automatic stay. Both bankruptcy chapters come with the automatic stay which stops creditors from pursuing debt collection activities. Nevertheless, chapter 7 only stops lawsuits and wage garnishments. Chapter 13 stops lawsuits, wage garnishments and foreclosures. This means that people can file chapter 13 if they want to stop their homes from being foreclosed one.

People interested in chapter 7 or 13 should talk with a Washington bankruptcy lawyer. The lawyer generally evaluates their clients’ financial situation and figures out which bankruptcy is best. Also, the bankruptcy lawyer files the bankruptcy petition and attends the meeting of the creditors with their clients.

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