What Are the Advantages of Chapter 7 Over Chapter 13 Bankruptcy?


Quick Answer

The advantages of Chapter 7 bankruptcy over Chapter 13 bankruptcy include being allowed to retain property, not being required to pay back debt and obtaining a quicker resolution, says Nolo. Consumers usually prefer to file for Chapter 7 bankruptcy, but not everyone qualifies.

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Full Answer

Most people who file for Chapter 7 bankruptcy do not lose any property, according to Nolo. Property, such as a car or a home, that is used as collateral on a loan may not be protected by Chapter 7 bankruptcy. Filers are allowed to keep most necessities. Chapter 7 bankruptcy erases most debts, except for certain "nondischargeable" items, such as a car loan, a mortgage, unpaid child support, student loans and current taxes. The average time it takes to process a Chapter 7 case is three to six months.

Chapter 13 bankruptcy requires the repayment of at least a portion of debt, says Nolo. In order to gain the discharge of any remaining debts, a three- to five-year repayment plan must be completed unless the court finds a case for hardship. Most people who file for Chapter 13 don't complete their repayment plans, so their debts are not discharged. Each type of bankruptcy has certain qualifications. People with sufficient income after allowing for basic expenses and certain types of debt are not eligible for Chapter 7 bankruptcy.

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