What are the benefits of filing chapter 7 bankruptcy vs Chapter 13 bankruptcy?

A Chapter 7 bankruptcy is what most people think of when considering filing a bankruptcy. It is a different process than what someone will find when going through a Chapter 13 bankruptcy. The differences are very clear and stark. Here are the benefits of filing for Chapter 7 bankruptcy instead of Chapter 13.

Debts Are Completely Discharged

One of the main and most important benefits of Chapter 7 bankruptcy is that the debts, excluding some taxes, domestic support obligations, and student loans, are completely discharged.  Chapter 13 cases require creating a payment plan and sometimes negotiating with creditors. This is not the case with Chapter 7 bankruptcies. If the bankruptcy is approved, then all of the eligible unsecured debts will simply go away. This leaves filers free to start over again financially.

No Restrictions on Debt Amounts

Chapter 13 bankruptcy rules have strict limits on the amount of debt that can be handled by the process. If someone owes too much, then it is simply not possible to do anything under Chapter 13 rules. Chapter 7 bankruptcy has the advantage of being able to cover all qualified debts for a person. There are no limits when it comes to the amount of debt that can be discharged with a Chapter 7 filing. This is very helpful for people with massive debts that have been accruing for many years.

No Loss of Income

A primary feature of Chapter 13 bankruptcies is that the filer will need to make payments to the court and creditors from anywhere to three to five years. A Chapter 7 bankruptcy lets filers keep all income after the case is filed. There are no repayment plans or requirements to send money to creditors later.

The Process Can Happen Quickly

A Chapter 13 bankruptcy can take some time to complete. It could take a long time to reach an agreement and then years of payments to finally resolve the bankruptcy. A Chapter 7 bankruptcy happens much fast. A typical case can be resolved in one to three months. The debts can actually be fully discharged and gone just a month after the ruling instead of years later.

Filing Is Often Simpler

A final benefit is that filing for Chapter 7 bankruptcy can be much simpler than filing for Chapter 13. The process is somewhat streamlined. This is especially true for people with very basic debts and few assets. The simple process is beneficial because it is easier to deal with paperwork and understand what is going on.