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What is the difference between Chapter 7 and Chapter 13?

If you are a Kentucky resident thinking about filing for bankruptcy, you may be wondering which type of bankruptcy, Chapter 7 or Chapter 13, is right for you. As FindLaw explains, both types of bankruptcy give you debt relief, but there are substantial differences between them.

Chapter 7 bankruptcies usually are simpler and less time-consuming. Not surprisingly, they therefore account for about 71 percent of all bankruptcies filed. In order to file a Chapter 7 bankruptcy in Kentucky, however, your annual income must be less than $40,633 if you are single and less than $47,788 if you are married.

Your home and car

Assuming you have a mortgage on your house, a Chapter 13 bankruptcy probably will let you keep it if you stay current with your court-ordered payments. In a Chapter 7 bankruptcy, however, you likely will forced to give it up, although you can delay the date when you have to do so. The same holds true for any vehicle you do not already own free and clear.

Your credit card debts

A Chapter 7 bankruptcy will allow you to wipe out your credit card and other consumer debts under most circumstances. In a Chapter 13 bankruptcy, you must continue making payments on them during the term of the bankruptcy. However, if you have not fully paid them off when the bankruptcy terminates, their balances likely will be wiped out at that time.

Student loans, alimony and child support

Neither a Chapter 7 nor a Chapter 13 bankruptcy relieves you of your obligation to pay child support and/or alimony. Likewise, neither will negate your responsibility for paying off your student loans.

There are other differences as well between a Chapter 7 and Chapter 13 bankruptcy. This information is provided for educational purposes and should not be interpreted as legal advice.

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