Difference Between Chapter 7 and Chapter 13

A Level Academy Islamabad

Transcript

00:00Like air travel, not all bankruptcy is the same.

00:03Chapter 7 and Chapter 13 are two of the most common forms of bankruptcy,

00:08and they each have their pros and cons.

00:10The one for you depends firstly on your circumstances,

00:13and then, if you have a choice, how you want your bankruptcy to play out.

00:17We'll begin where literally no one starts a novel—Chapter 7.

00:22Chapter 7 is a liquidation bankruptcy.

00:25And like liquid, it sees most of your unsecured debts,

00:29such as credit cards and medical bills, get washed away without the need to repay your balances.

00:34First, however, you must file a petition with the court.

00:37This prompts an automatic stay that stops your creditors from collecting

00:41while your petition is considered and your case is active.

00:44Awesome, right?

00:46Well, remember that it's only a pause and that no debt is fully wiped away

00:50until you receive your discharge at the end of the case.

00:53A trustee is also assigned to you by the court,

00:56and their job is to make sure each side—you and the creditors—are treated fairly in bankruptcy.

01:02And although the trustee is also in charge of possibly seizing and selling your non-exempt items to creditors,

01:08you can often keep your home and certain valuables the court allows.

01:12Chapter 7 is ideal if you want a quick, clean, fresh start.

01:16However, your income and collection of assets must be low enough to qualify.

01:21Chapter 13, on the other hand, is known as a reorganization bankruptcy.

01:25This is for debtors with a large enough income to pay back a portion of their debts.

01:30Debtors will often choose Chapter 13, even if they qualify for Chapter 7,

01:34because you can keep all your property,

01:37although you must pay the creditors back an amount equal to the value of that property.

01:41Chapter 13 also lets you catch up on things like missed mortgage and car payments,

01:46so that you can hold on to your house and your ride.

01:49And it's ideal for people with non-dischargeable debts like alimony and child support debt.

01:54But unlike Chapter 7, Chapter 13 often takes 3 to 5 years of payment to discharge.

01:59But bankruptcy can, of course, be a lot more complex than what's addressed in a short,

02:04but staggeringly entertaining video like this one.

02:07That's where we at ICE Legal come in.

02:10A law firm that can help you navigate these choppy seas.

02:13Contact us anytime at www.icelegal.com.