Facing bankruptcy is a trying time, but it is important to fully understand your options. The two kinds of bankruptcy that individuals are eligible to file in Livonia are known as “Chapter 13” and “Chapter 7.” There are several differences between the two, and which is best (or even possible) for you to file for depends on several factors.
According to FindLaw, the biggest difference between Chapter 13 and Chapter 7 is pursuant to your income level. Chapter 7 is only available to those of lower income levels, the threshold of which is different between states. Chapter 7 is the most commonly filed bankruptcy, with roughly 71% of all cases. Chapter 13 is the path taken by those with higher income levels, and the remaining 29% of bankruptcy cases are this kind.
The main difference between the two is that Chapter 7 is more focused on liquidating a debtor’s assets, while Chapter 13 focuses on getting the debtor onto a payment plan. Under Chapter 7, it is likely that assets like a house or car will be returned to the bank (though not necessarily), while on Chapter 13 the debtor gets to hold the assets but must continue to make consolidated debt payments to a trustee.
Additionally, under a Chapter 7 bankruptcy creditors can go after any involved co-signers for their part in the debt, but under a Chapter 13 bankruptcy, this is not possible. The right choice between Chapter 13 and Chapter 7 for your situation depends on many factors. While this post is intended to educate you about the differences between Chapter 13 and Chapter 7, it is not intended as legal advice.