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Bryan P. Keenan

Learn about how Chapter 7 and 13 bankruptcies differ

Once you decide that you simply can't go on living in debt, you have to decide what you are going to do about it. Bankruptcy is an option, but you still have to determine what type of bankruptcy is right for your needs.

There are two main forms of personal bankruptcy -- Chapter 7 and Chapter 13. While these are both meant for personal use and not for business use, understanding how these differ can help you as you explore your options for bankruptcy.

Payments for debts

A Chapter 7 bankruptcy is known as liquidation bankruptcy. You won't have to make payments on the debts that you have. Instead, assets that you own are liquidated to pay for the debts.

A Chapter 13 bankruptcy is known as a working man's bankruptcy. You will have to make payments to the bankruptcy trustee. Those payments will be distributed to your creditors according to a specific order that is predetermined.

Exclusions do apply

In a Chapter 7 bankruptcy, any debts that you have because of a criminal conviction likely won't be discharged. This means you would still be responsible for them.

In a Chapter 13 bankruptcy, you will make payments on criminal conviction debts. Any remaining balance on these debts is usually forgiven after you've completed the payment schedule set by the bankruptcy trustees.

Child support and other court-ordered support payments won't be discharged in any bankruptcy. You will still owe these debts when the bankruptcy is completed. The same is true for most, but not all, student loans.

Secured debts

Your vehicle and home that you still owe money on will have to return to the creditor in a Chapter 7 bankruptcy. The only exception to this is if you are able to pay wholesale price for the asset.

You can usually work out a deal to keep these assets if you file a Chapter 13 bankruptcy. You must keep up with the payments of your bankruptcy.

Exempt vs. non-exempt property

Exempt property is property that the bankruptcy court won't take. In a Chapter 7 bankruptcy, you can keep it, but you can't hang on to non-exempt property. In a Chapter 13 bankruptcy, you can usually keep exempt and non-exempt property.

If you are considering filing for bankruptcy, you must know which type you qualify to file. Once you know this, you can determine how the filing will impact your future. Make sure you consider the entirety of the situation before you make your decision.

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Bryan P. Keenan & Associates, P.C.

993 Greentree Road
Suite 101
Pittsburgh, PA 15220

Phone: 412-923-4941
Fax: 412-444-0158
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