Philadelphia bankruptcy lawyers explain the chapter 7 and chapter 13 differences


It probably comes as no surprise to read that erasing someone’s debts is easier said than done. In other words, to gain that elusive fresh start after a severe period of financial woes, quite a complicated procedure enters the equation.

The bankruptcy process is by no means simple, and this is why there are no so many Philadelphia bankruptcy lawyers doing the rounds and picking up so much business. It’s something that’s immensely complex, requires a lot of information and at the end of everything, results in a big black mark on your credit history. On the plus side, this black mark is exactly what some people need to get back onto their feet again.

As the title may have suggested, today’s article is going to concentrate on the various chapters that form the bankruptcy process. It might appear strange to reference “chapters”; after all, this is hardly about a romantic novel. However, chapter 7 and chapter 13 have huge repercussions in bankruptcy and we will now delve into each one to explain just how they both work.

The lowdown on chapter 7

In truth, most people would much prefer to file a chapter 7 bankruptcy. We’ve already eluded to the fresh-start factor, and just how this can help you really kick-start your life again.

Well, the nature of chapter 7 permits you to do exactly this, as immediately after the process is complete you won’t have any repayment obligations. The debt is effectively removed from your history, and you can attempt to rebuild your life with this.

As well as the above, there’s the small matter of exempted assets. These are assets that are not going to be taken by creditors and even include your main residence. This is quite a significant step and while so many people are worried about losing their home due to bankruptcy, this certainly isn’t the case with a chapter 7.

A slight, but understandable downside is that not all debts are removed. Student loans and taxes still need to be paid, meaning that the slate isn’t completely clean following the proceedings.

The lowdown on chapter 13

Chapter 13 on the other hand works slightly differently. Due to the fact that you’ll have to pay back your debts, usually over a period between three and five years, it’s nowhere near as attractive. Unsurprisingly, your choices at this point are quite limited though and a chapter 13 can still allow you to reset your financial life – albeit over a longer time period.

On the plus side, there is no danger to your main residence again. Additionally, while some people might be put off by the fact that you’ll keep have to make repayments, let’s not forget that this also allows you to keep some of your assets that aren’t exempt. In other words, you don’t have to lose as much as you would with a chapter 7 agreement. Instead, you will make payments to a trustee, who will act to forward them to creditors.

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