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How do Chapter 7 and Chapter 13 bankruptcies differ?

On Behalf of | May 3, 2022 | Bankruptcy

Many people in Minnesota struggle to stay atop of their finances, and if you are among them, you may be looking for a way to help dig yourself out of debt. Depending on the specifics of your situation, it may serve you well to think about whether filing for bankruptcy might give you a much-needed fresh start. If you decide to file for personal bankruptcy, you may do so through either a Chapter 7 bankruptcy or a Chapter 13 filing.

Quicken Loans reports that there are a number of important differences that exist between Chapter 7 and Chapter 13 bankruptcies. Some of the differences include how they work, how you qualify for them and how long they take to discharge your debts.

Filing for Chapter 7 bankruptcy

If you have limited means, a Chapter 7 bankruptcy may make sense for you. You have to pass a means test before filing for Chapter 7. If you pass the means test, you may move forward with a Chapter 7, or “liquidation” bankruptcy. When you file for this method, you may have to give up your home, vehicle or other assets to pay back creditors.

Filing for Chapter 13 bankruptcy

A Chapter 13 bankruptcy might be a good idea if you have some money available to you and want to avoid having to turn over your home or other valuable assets. To qualify for this type of bankruptcy filing, your “secured” and “unsecured debts” must fall within certain limits.

While there is some variation, most Chapter 7 bankruptcies take between about four and six months to complete. Chapter 13 bankruptcies may take about three and five years to discharge your debts.