What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

Chapter 7 or Chapter 13: Find Out Which Bankruptcy Fits Your Needs

Individuals facing financial challenges explore the options of bankruptcy to find relief. The choice and difference between Chapter 7 and 13 in Sunset Hills, MO, depends on individual financial circumstances, the types of debts involved, and the desire to preserve specific assets during the debt resolution process. 

Understanding the distinctions between these chapters is crucial for residents of Sunset Hills. That could help them navigate the complex terrain of bankruptcy and seek a solution tailored to their unique financial circumstances.

Short Summary:

• Chapter 7, known as liquidation bankruptcy, erases debts and suits those unable to repay. Chapter 13, a reorganization bankruptcy, is for stable-income individuals, allowing them to work toward repaying over time while keeping possessions. 
• Chapter 13 involves repaying debts over three to five years, offering a chance to catch up on payments. Chapter 7, known for its speed, suits those with essential items but limited assets. 
• Special considerations include business entities and limitations on frequent bankruptcy filings.
• Whether choosing Chapter 7 or Chapter 13, the automatic stay kicks in, halting creditors’ collection efforts for a set period. In Chapter 13, this protection can last for years. In Chapter 7, it lasts around three months.
• Scenarios highlighting the best option include employed homeowners facing foreclosure benefiting from Chapter 13. Unemployed debtors with few assets should choose the faster debt elimination of Chapter 7. 

The Difference Between Chapters 7 and 13 Bankruptcy in MO

What sets apart Chapter 7 and Chapter 13 bankruptcies? When people declare bankruptcy, it’s often because they can’t manage their bills due to debts surpassing their income. Two main types of bankruptcy exist – Chapter 7 and Chapter 13 – each serving a distinct purpose.

Chapter 7, known as liquidation bankruptcy, erases your debts and is suitable for those unable to repay their debts. Chapter 13 rearranges your debt and suits individuals with a stable income and valuable assets, offering a chance to work toward repaying over time.

Which Bankruptcy Chapter Should I Go For in MO: Chapter 7 or Chapter 13?

Deciding between Chapter 7 and Chapter 13 bankruptcy in Missouri isn’t your choice to make. The type of bankruptcy you qualify for depends on factors, such as your income, properties, and total debt amount.

Opting for Chapter 13 in Missouri

If you opt for Chapter 13 in Missouri, it involves repaying your debts to creditors over three to five years. That allows you to keep all your possessions, which helps when burdened with financial challenges. It can help you catch up on late payments, such as preventing home foreclosure or keeping your car. 

While it allows you to force a payment plan on a creditor, Chapter 13 can be costly. Making monthly payments may be challenging. Business owners should explore small business bankruptcies since Chapter 13 isn’t available for businesses.

Opting for Chapter 7 in Missouri

Chapter 7 bankruptcy in Missouri is known for its speed and affordability. The process is quick, usually completed in a few months, and you don’t need to pay anything to creditors. This option is suitable if you own essential items but not much more. However, the Chapter 7 trustee may sell non-essential items to pay creditors if you have extra assets. 

With Chapter 7, there’s no payment plan to catch up on overdue mortgage or car payments. That poses a risk of losing your home or car if you’re behind on payments when you file.

What is Needed to Qualify for Chapter 7 or Chapter 13 Bankruptcy in Missouri?

To be eligible, you have to meet specific conditions. If you’ve filed before, ensure enough time has passed before filing again, as there’s a waiting period. Qualifications are based on your income, with Chapter 7 requiring your family’s gross income to be lower than the median for the same-sized family in your state. 

Chapter 13 qualification involves considering factors like priority nondischargeable debt, nonexempt property value, or disposable income, and the monthly payment can be challenging for many. Understanding these requirements is essential before deciding between these two types of bankruptcy.

Special Considerations:

• Business Entities: Chapter 7 is available to individuals and businesses, while Chapter 13 is generally reserved for individuals. Businesses that want to reorganize debts should consider Chapter 11 bankruptcy.
• Previous Bankruptcy Filings: There are limitations on how frequently an individual can receive a discharge through bankruptcy. For example, a debtor may need to wait eight years between filing for Chapter 7 bankruptcy to be eligible for another Chapter 7 discharge.

Automatic Stay

The automatic stay is available whether you choose Chapter 7 or Chapter 13 bankruptcy. That stops creditors’ efforts to collect debts for a set period. In Chapter 13, this protection can last for years. In Chapter 7, it lasts around three months.

How Do I File for Chapter 7 Bankruptcy in Missouri?

To file for Chapter 7 bankruptcy in Missouri, you must do the means test first. After completing the means test, you should collect the following documents:

• A list showing the people or companies you owe money to and how much you owe each of them
• A list of the things you own and how much they are worth
• Your latest tax return
• Your pay stubs or other proof of how much money you earn

How Do I File for Chapter 13 Bankruptcy?

To start the Chapter 13 bankruptcy process, the person filing (called the debtor) needs to submit a request to the bankruptcy court. This request includes details about the debtor’s creditors, income, expenses, and belongings. The debtor must propose a plan for repaying debts, which gets submitted to the court.

After filing the petition and repayment plan, there’s a meeting where creditors can voice any concerns about the plan. If there aren’t any objections or if any concerns get resolved, the court approves the repayment plan. Afterward, the debtor begins making payments according to the plan.

Choosing Between Chapters 7 and 13 Based On These Situations

Choosing between Chapter 13 and Chapter 7 depends on your situation. Here are some scenarios that highlight the best bankruptcy option:

Employed Homeowners Facing Foreclosure or Mortgage Issues – Chapter 13:

• Helps catch up on overdue mortgage payments
• Clears some dischargeable debt
• Prevents foreclosure and reduces credit card and medical debts

Unemployed Debtors with Few Assets – Chapter 7:

• Fastest way to eliminate debt, especially for those with limited assets
• Often referred to as a “no asset” bankruptcy

Unemployed Homeowners with Significant Property – Possibly Chapter 7:

• Chapter 7 may be suitable if the state exempts a significant part of the homeowner’s equity. However, if the exemption doesn’t cover the equity, there’s a risk of losing the house.
• Chapter 13 is unlikely for jobless homeowners unless they have enough income for a repayment plan.

In both cases, whether Chapter 13 or Chapter 7, bankruptcy offers a chance for a fresh start.

Navigate the Process of Choosing the Best Type of Bankruptcy For You!

Bankruptcy can be overwhelming, but Doyel Law is here to guide you through the process with legal help. Whether you’re considering your options and the difference between Chapter 7 and Chapter 13, we understand your challenges.

Are you worried about losing assets in Chapter 7? Our bankruptcy attorneys can help protect what matters most to you. 
Are you concerned about the lengthy process of Chapter 13? We’ll streamline the journey for you.  Don’t let debt control your life. Take the initial step toward financial freedom by reaching out to Doyel Law. Our dedicated team will assess your situation, provide personalized solutions, and ensure you understand every step of the process. 

Let us be your ally in overcoming the challenges of bankruptcy, family law, and estate planning. Contact us today for a consultation and start your journey to a debt-free future. Your fresh start is just a call away!