Simply put, income is the primary difference between these two types of bankruptcy. A Kentucky resident has to be below a certain income level in order to qualify for Chapter 7 (commonly referred to as a liquidation bankruptcy). If an individual’s income is higher than that demarcation point, a Chapter 13 (commonly referred to as a reorganization) will need to be filed.
There are numerous other differences between these two chapters, which are most often filed by individuals. A Chapter 7 is often less time consuming, and the process is easier. The major drawback of this debt-relief option is that the trustee could sell any property that does not fall under an exemption in order to pay creditors. However, the property of many people who file under this chapter falls within the exemptions. In addition, if the filer owns a home, it might be necessary to surrender it to the mortgage lender if he or she is unable to make the payments.
In a Chapter 13 proceeding, the filer is allowed to retain property — such as a home and other assets — that would otherwise not fall under an exemption in a Chapter 7. A repayment plan is filed with the court for approval. If approved, the filer will make the payments prescribed in the plan for three to five years. Successfully completing the plan could result in a discharge of any unsecured debts not provided for in the plan.
When a Kentucky resident decides to file for bankruptcy, it would be a good idea to consult an attorney regarding whether to file a Chapter 7 or Chapter 13 bankruptcy. An attorney can guide you through the process to pursue the best outcome possible. There are numerous deadlines that will need to be met and paperwork that will need to be filed for either chapter, and failing to adhere to the court’s requirements could result in a dismissal of the case.
Source: FindLaw, “Chapter 7 vs. Chapter 13 Bankruptcy“, Accessed on Aug. 19, 2016
