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The Differences Between Chapter 7 And Chapter 13 Bankruptcy

Posted in: Bankruptcy

When potential clients call our office, the two most common questions they ask are which type of bankruptcy they should file and what are the differences. In general, as a consumer, the United States Bankruptcy Code offers two different kinds of bankruptcies – Chapter 7 and Chapter 13. Although both are designed to give debtors a “fresh start,” they differ in important ways. Below is a breakdown of the two.

What is Chapter 7 Bankruptcy?

Chapter 7 is the most frequent bankruptcy filed by consumers. Due to the pandemic and increase in layoffs, now more than ever people are struggling to pay their bills. Fortunately, Chapter 7 bankruptcy was created to help people get a fresh start by eliminating their unsecured debt, such as credit card bills, medical bills, payday loans, and others.

In a Chapter 7 bankruptcy, you do not use any of your disposable income to pay back your creditors. Instead, a bankruptcy trustee is appointed to determine if you have any nonexempt assets that can be sold or “liquidated.” Any proceeds from the sale are then disbursed to your creditors pro rata. This may seem scary, but in practice it is very rare that the trustee finds assets to liquidate. Additionally, when you speak with one of our bankruptcy lawyers in Chicago you will know the likelihood of losing any assets prior to filing, if any.

Chapter 7 bankruptcy is not available to everyone. To qualify you must pass the “means test,” which assesses whether your income is under the state median for a household of your size. If you are above that threshold, you may be able to “rebut the presumption” if you have special circumstances justifying the use of additional expenses to get you within that threshold. The other qualification is to not have received a discharge in a prior Chapter 7 or Chapter 13 within a certain amount of time.

Once a Chapter 7 bankruptcy is filed, it typically only lasts 6 months. If successfully completed, you will receive a discharge and eliminate your qualified unsecured debt. 

What is Chapter 13 Bankruptcy?

Unlike in Chapter 7, Chapter 13 requires you to repay your creditors over a three-to-five-year period through a reorganization plan overseen by the bankruptcy court and trustee. Many people prefer Chapter 7 because of the length of time you are in bankruptcy, however, Chapter 13 offers numerous advantages not available in a Chapter 7. For instance, Chapter 13 allows you to save your home if you are facing foreclosure or behind on your mortgage, prevent repossession of your car, and discharge certain debt you otherwise would not be able to under a Chapter 7.

The qualifications for filing a Chapter 13 are less stringent too. To file a Chapter 13, you must not exceed the debt limit which changes periodically, and you can file even if you previously received a discharge in another bankruptcy case.

Once a Chapter 13 case is filed, you will have a confirmation hearing. This hearing is to determine if the plan you filed complies with the bankruptcy code and allows creditors an opportunity to   object to their treatment. If the plan is confirmed, the payments you proposed to your creditors is set and your obligation going forward is to continue making your monthly bankruptcy payments.

Either bankruptcy you file protects you from your creditors by virtue of the “automatic stay” which stays or stops creditors from attempting to collect on your debt. This includes attempting to repossess your car, garnish your wages, file a lawsuit, foreclose on your house, and even call or harass you for money.

Contact our Chicago bankruptcy lawyers today!

If you are struggling with debt and need help deciding which bankruptcy is right for you, call DebtPros now at (312) 883-5422 to speak with one of our experienced bankruptcy attorneys. We will provide a free consultation and thoroughly review your case.

Client Testimonials

What Our Clients Say

I want to start by saying THANK YOU! John was patient, prompt, informative and easy to work with. In our time of need, he helped my parents file for bankruptcy successfully and at a great price. If you are ever in the need of any services concerning your debt and potential bankruptcy litigation, I give my word and experience that John is the BEST in the Chicagoland area.

- Eric McDowell

John was outstanding in the process of my chapter 7. Not only did he keep me abreast of every step and matter that involved my BK but he was reasonable with the price and the time I had to pay him. He sent me places that accepted my Bk when it came to getting a new car as well and his communication was an A+. There was never a time I couldn’t reach him and if he missed my call he would proceed to call back before the day over or early the next day. I recommend him to any and everyone!

- Lamar Johnson

John is a great lawyer to work with. It’s easy to be honest and share things with him. It felt good to communicate with him. When I reach out to him, he is very good at answering the phone or responding when he can. I recommend his work as well. He’s very organized and gets things done. Thank you John.

- JP W

This guy made my experience so smooth I would recommend him to anyone who is thinking about filing for bankruptcy. He is very patient with his clients and Is very informative. Every question I had he answered even if I asked it twice. Highly recommend!!!!!!

- Nikita Nichols

John is very patient, he’s worked with me from start to finish. Always answer my questions and never made me feel like I’m a bother. Never made me feel like I’m a number in his book. He’s very helpful and caring which is why I’d recommend him over any bankruptcy lawyer. Thanks John for all you do.

- Corey Ross

Thank you team DebtPros! The choice to file was not easy, but it was the best decision for my family. John, I appreciate your kindness, thoroughness, and professionalism. I feel like you’ve guided me through this process in a very personable way. Thank you for always being available to chat, and making the experience so efficient and understanding. I can see the silver lining toward a fresh start! Thank you again & Have a wonderful summer. Sincerely, SB.

- Shelly Boyki

I am honored to provide such a financial relief feedback for this amazing blessing whose name is Atty. Wonais. There is so much I could share endlessly about his superb knowledge and service that he offered me as his client. However, I will share what I found to be essential in my financial issues that Atty. Wonais selflessly provided to me as his client; his expertise, his ability of trustworthiness was "everything" oh my goodness he is truly trusting thru the entire process.

- Val B.

I was referred to them, and this has been the best decision I have ever made. I never been this confident in a person like I am with John. He heard my needs and wants, he made it possible to give me that. Excellent customer service. He put all my options on table to fit my needs. He never sugarcoat he gives it to you like it is meaning he’s not rude or unprofessional. He’s that person that tells you what you need and bot what you want. I have referred all my friends and family to his service.

- Nicole Murray

So one night I went online looking for advice on google and John came up and I called him on the weekend late evening and he happened to answered which was awesome. John helped me out with my situation he gave me amazing advice and options on how to take on my problems the right way. John is super easy to talk to Very informative and he answered all my questions.

- Freddy

This office and staff was amazing. I was referred to John from my best friend and as soon as I reached out he was very prompt on getting back to me and helping. From start to finish the process was amazing stress free and straight forward. He stayed in communication no matter what time of the day. If I had a question he had the answer. His tips and tricks and knowledge helped me a lot and made me more comfortable and excited about starting over.

- Kierra Smith

John took me on as a client with no problem. He was very understanding, passionate, helpful and available every step of the way. Trust me I am a very happy client, I definitely recommend John.

- Jessica Burton

John did a wonderful and seamless job with my case-he handled everything properly and was very timely in all of his communication. He is professional and reliable. I would highly recommend him to anyone who may have to deal with a bankruptcy. Five stars!

- Ashley I.

I had a great experience with Wonais Law, LLC. John is very patient and replies right away to any questions or concerns that you have. I would recommend his services to anyone.

- Erika Sing

If I can leave more stars I will. Wonaia Law is highly recommended. John is great with making sure I understand everything that was going on, I really appreciate how he’s always there to answer any questions I have ... My chapter 7 is just about over and I have 2nd chance with living life debt free.

- Tiffany Austin

John Wonais is responsive, professional, and cares for his clients. He is extremely experienced in civil litigation and has answered all of my questions in a way that I can understand as someone with zero experience in law. He has gone above and beyond and has always made sure to follow up with me when I’ve needed it. I truly feel that he has my best interest at heart.

- Ariana Khosravani

I really wanna give a big thanks to John he helped me out a lot. He walked me through everything to make sure I understand, good quality. I don’t think I could of did it without him ?

- Twona Gibson

He gave an expert and advise and a great service. He went all out to be sure I got a solution to the issue I had.

- Betty Salami

I want to thank John for helping me win my case he was very helpful throughout the process and very professional, thanks again.

- Diana M.

I was very impressed on how quickly I was responded to, and how my lawyer John made everything so easy for me to understand. I have never had to hire a lawyer before, and I'm really glad that I met such a professional, and honest person. I would highly recommended.

- Angela Mata

DebtPros is a law firm that specializes in consumer bankruptcy. John has years of valuable experience and is dedicated to helping clients file for bankruptcy. John is responsive and provides a free consultation to prospective clients. I recommend this firm to anyone who is considering filing for bankruptcy.

- Taylor Kosla

John Wonais provided me with timely and beneficial legal counsel. I would trust his firm to represent me in any creditor-related case. John's professionalism and expertise are second-to-none; highly recommend his services.

- Richard Young

Very helpful, professional and they’re reasonably priced.

- Anthony Brown

Great Professional Service- I have been working with Wonais Law the past couple weeks and I have been blown away from their attention to detail and professionalism. They get work done quickly and are extremely responsive. I would recommend this firm to everyone needing legal services.

- Andres Jara

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