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How is chapter 7 and 13 consumer bankruptcy different?

The accumulation of unpaid debts creates a heavy financial burden, especially when lacking the personal resources to meet the growing demands from creditors. Bankruptcy allows everyone the ability to obtain a new financial start.

In general, filing for bankruptcy will cease the target you carry among creditors and financial loan institutions. The debts you owe are essentially cleared, but the details of how this is legally brought about differs between chapter 7 and 13 bankruptcy classifications.

Chapter 7 bankruptcy

Filing for chapter 7 bankruptcy allows outstanding debts to be cleared on the condition that property is sold to distribute amongst the lenders owed. California has outlined specific property deemed “exempt” from being seized. This means exempt property will remain yours after the bankruptcy procedure is finalized. There are also federal exemptions in addition to California property exemptions to review. One of the main solutions of chapter 7 bankruptcy is eliminating credit card debt. However, it will not clear debt related to taxes owed or child support payments for example.

Chapter 13 bankruptcy

Chapter 13 bankruptcies establish a legalized payment plan between 3 to 5 years to satisfy outstanding debts. The most appealing aspect of this option is how it allows someone to hold onto important assets (e.g. car and house) instead of having them at risk for being seized and sold. Past payments are more easily payable when a plan is put in place to take care of this and current financial obligations to the creditor.

Legal guidance for bankruptcy decisions

The key difference between these two bankruptcy options is that chapter 7 offers more immediate relief than chapter 13, which is a slower, more long-term resolution. A qualified and experienced attorney is able to review all stipulations and exemptions that apply to your unique financial situation. Financial burdens often wreak havoc on our mental and emotional wellbeing. Thankfully there is help and support available to guide you through your legal options and help re-stabilize your future.

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The Law Office of Lawrence L. Szabo
3608 Grand Ave
Suite 1
Oakland, CA 94610

Phone: 510-922-0565
Fax: 510-834-9220
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