Chapter 7 vs. Chapter 13 Bankruptcy

If you are considering filing for bankruptcy, there are many factors to take into account. Bankruptcy can be a strategic financial move to give you a fresh start at rehabilitating your credit score and creating a successful financial future. There are different types of bankruptcy available in Illinois. Deciding which type of bankruptcy is best for your situation is important. Two of the more common types for individuals are Chapter 7 bankruptcy and Chapter 13 bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 is the most common type of bankruptcy filed. Chapter 7 is a way to discharge your debt, allowing you to start over. Essentially, your debts are “wiped out.” Not every debt is dischargeable. Student loans, child support, and most tax debt are just a few of the types of debt that are not dischargeable through Chapter 7 bankruptcy.

Chapter 7 bankruptcy begins with filing a petition. This petition lists your assets and debts. You will receive notice of a §341 meeting, of the First Meeting of Creditors. In the §341 meeting, you will meet with a United States Bankruptcy Trustee who will ask you questions about your petition and financial situation. The trustee is making sure you are not hiding any assets that could be used to pay off debts. 60 days after the §341 meeting, as long as there are no assets found by the trustee, you will receive a discharge of debt. Once you receive your discharge, you are able to start rebuilding your credit and building a financial future.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is a plan in which you pay back some, or all, of your debts over a three to five-year period. You and your attorney will devise a plan by looking at your assets, finances, and expenses to determine a monthly payment to creditors. A petition is filed, as well as the Chapter 13 Plan. Payments under the plan must start within 30 days after the case is filed. The plan must be approved by the court. The plan outlines which creditor receives what portion of the monthly payment. Payments are made to a trustee, who will then distribute the proper portion to the creditors. After the term of the plan is up, remaining debts are discharged.

Which Type of Bankruptcy is Best for Me?

Determining whether you should file a Chapter 7 or Chapter 13 bankruptcy is not a decision to be taken lightly. Your assets, financial situation, and expenses must all be accounted for in determining which to file. Both Chapter 7 and Chapter 13 have their benefits and drawbacks. The timing of the plans and the protections afforded by both are huge considerations in determining which type of bankruptcy is best for you.

If you are considering filing for bankruptcy, Hamilton & Antonsen, Ltd. wants to help you. We have the experience and knowledge to inform you of your options and the consequences of each choice. The Joliet bankruptcy attorneys have a proven track record of advocating for their clients. Contact us today to set you up for future financial success.