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What are some of the biggest differences between Chapter 11 and Chapter 13 bankruptcy?
Wiki User
∙ 11y ago
There are many stages to the bankruptcy process, each with differing conditionsa and consequences. Chapter 11 is very similar to chapter 13 however there are a few differences, the main one is that there is no limit to the amount of money owed by the debtor. This was a condition mainly concerning large companies however the limits have been extended to individuals as well.
Wiki User
∙ 11y ago
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What Are Chapter 13 Bankruptcy Exemptions?
Although most debtors keep all their property after filing a Chapter 13 bankruptcy, debtors must file exemptions when applying for this type of bankruptcy just like they do when they file for Chapter 7 bankruptcy. Filing exemptions in a Chapter 13 bankruptcy is for the benefit of creditors rather than the debtor himself. The exemptions inform the creditor of how much she is entitled to and allows her to compare the settlement of the case with the settlement the creditor would receive if the debtor filed Chapter 7 bankruptcy instead.Best Interest of Creditors TestU.S. bankruptcy law requires Chapter 13 bankruptcy applications to pass the "best interest of creditors test." Creditors involved in a Chapter 13 bankruptcy must receive at least as much from the bankruptcy as they would if the debtor filed Chapter 7 bankruptcy instead. The bankruptcy trustee performs this test by deducting the debtor's exemptions from the full value of the estate to determine how much the estate would be worth if the debtor filed Chapter 7 bankruptcy. Creditors may receive more from Chapter 13 than they would from Chapter 7, but they may not receive less from Chapter 13.Determining Payment AmountChapter 13 exemptions, or more specifically, the best interest of creditors test, are also used to determine how much the debtor must pay over the lifetime of the plan. To make this determination, the bankruptcy trustee compares three numbers. The best interest of creditors test, or the non-exempt value of the estate minus administrative costs, is one of these three numbers. The total amount of priority claims, such as alimony, child support and back taxes owed, is another number the bankruptcy trustee looks at, as is the debtor's disposable income, or income after payroll taxes each pay period. The bankruptcy trustee takes the biggest of these numbers and divides it by the life of the plan to determine how much the debtor must pay each month.ConsiderationsChapter 13 bankruptcy may be attractive to some debtors because debtors are at low risk of losing their property through this arrangement and there are no income limitations on this type of bankruptcy. However, debtors cant file for Chapter 13 bankruptcy if they have such large exemptions that the bankruptcy will fail the best interest of creditors test. In addition, Chapter 13 bankruptcy negatively affects the debtor's credit for seven years and requires debtors to pay the bankruptcy trustee on a monthly basis.
How to Choose Between a Chapter 7 and a Chapter 13 Bankruptcy?
There are two types of bankruptcies that individual consumers file; Chapter 7 and Chapter 13. Chapter 7 involves liquidation of assets and completely discharging a person’s debts and thus freeing them of the obligation to pay. Chapter 13 is a little bit more complicated.In a Chapter 7 bankruptcy, credit cards and other dischargeable debt is wiped clean and allows the debtor an opportunity to start over with no debt. The debts still remain on the credit report, but the debtor no longer owes any of the balances. In a Chapter 7, you are usually able to keep your car and house and other assets that are necessary in everyday living. Sometimes you are able to reaffirm these debts for lower and more affordable monthly payments and lower interest rates. The biggest difference between the two chapters is that the Chapter 7 is discharged within a matter of months, while the Chapter 13 could continue for 3 to 5 years.Chapter 13 bankruptcy is different from a Chapter 7 bankruptcy primarily because debt isn’t wiped clean. Chapter 13 is also referred to as a reorganization plan or an individual reorganization and is filed by debtors that have steady incomes and may not qualify to file a Chapter 7 bankruptcy. If the debtor has valuable assets that cannot be exempted, they may choose Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, the debts are combined and payments are made to a trustee for a period of time of 3 or 5 years. The payments that are made and the length is determined by the income and the amount of debt. After all payments are made to the trustee for the designated period of time, the debtor receives a discharge of debt.For both Chapter 7 and Chapter 13 bankruptcies, the debtor will have to go through a series of checks to make sure they qualify for these forms of debt relief. Most debtors qualify for one or the other, but should meet with an attorney if you are not certain as to which chapter you should file.
If your credit score is 535 after filing a chapter 7 bankruptcy that is not discharged will it lower more when the discharge becomes official?
Your credit rating after bankruptcy is based on a number of factors. Many people are consider a good credit risk after bankruptcy if they have no debt and a job. Visit my web site for an article on rebuilding credit after bankruptcy: http://www.chs-law.com/2005/05/rebuilding-credit-after-bankruptcy.HTML.AnswerMy score raised from 530 to 572 when I received my chapter 7 dicharge.
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