What is the Difference Between Chapter 13 Bankruptcy and Chapter 7 Bankruptcy?

Chapter 13 bankruptcies provide an attractive alternative for wage earners and home owners who are seeking relief from temporary financial difficulties. Not everyone can or should file a Chapter 13 case. There are certain requirements relating to income which must be met, i.e., the Debtor must have regular income.  Chapter 7 bankruptcy may be a preferable option for those who are willing to sell (or liquidate) their home (although often the home can be saved even in Chapter 7). Because of income requirements, Chapter 7 cases may serve as a better choice for those who have less income and want to get in and out of bankruptcy quickly.

By contrast, Chapter 13 cases take a long time to complete. The reason for the lengthier duration stems from its basic purpose and structure. Chapter 13 bankruptcies allow wage-earners the chance to keep their homes, cars or other non-exempt property. Accordingly, during the early stages of the process, a payment plan is established whereby the Chapter 13 debtor pays their disposable income to the Chapter 13 Trustee. The plan payments are used to catch up mortgage or other secured debt arrearages, back taxes, and perhaps some to unsecured debts such as credit cards.    At the end of the plan, the debtor receives a discharge from unsecured debts that are not fully paid.

Typically, these cases last for three to five years. Debtors must meet certain minimum eligibility requirements in order to qualify for this type of case. They must be prepared to pay all of what are known as “priority debts”including child support and alimony, wages you owe to employees, and certain specific types of tax obligations..  Then during the course of the payment plan, the debtor will need to make regular payments in order to make it successfully through the case until it reaches full conclusion.   

In Albuquerque, Giddens & Gatton Law, P.C. has bankruptcy attorneys who offer expert handling of Chapter 7, Chapter 11, Chapter 12 and Chapter 13 bankruptcy cases and can specifically provide advice as to disposition of property in Chapter 7, Chapter 11 and Chapter 13 cases.. The New Mexico firm represents many debtors and creditors in Albuquerque, Santa Fe, Taos, Raton, Farmington, Gallup, Grants, Roswell, Los Lunas, Placitas, Belen and the rest of New Mexico. Contact Giddens & Gatton Law, P.C. at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.