What is the difference between a Chapter 13 and a Chapter 7?
A Chapter 7 is a debt elimination, and a Chapter 13 is kind of like a debt consolidation where you repay your debts over a three to five year time period. A Chapter 13 usually eliminates interest on unsecured debts and may reduce interest on secured debts. Secured debt is where a creditor has the right to take property away from you if you do not pay it, such as a car loan or a mortgage.
Why would anyone file a Chapter 13, when they could just get rid of their debt in a Chapter 7?
If you are behind on your mortgage and/or car payments, you will usually lose them by filing a Chapter 7. If you have the ability to get caught up on your mortgage (or car) but the bank will not work with you, you can force them to accept payments through a Chapter 13 and retain possession. In addition, not everyone will qualify for a Chapter 7. There is a "Means Test" that must be passed to file a Chapter 7 and if you do not pass the "Means Test" due to excess household income, a Chapter 13 may be right for you.
What are the advantages of a Chapter 13?
In addition to keeping property that you may lose, debts not dischargeable in a Chapter 7 can be paid through a Chapter 13, such as student loans and back child support.
Does my spouse have to file with me?
Not necessarily, but debts incurred during your marriage usually makes the other party responsible even if the debt is only in one person's name. In a Chapter 13 all household income is usually required to be calculated in the monthly budget to determine how much you will have to pay into your Chapter 13.
Will my employer be notified of my filing?
If you are currently subject to a wage garnishment, your employer will have to be notified in order to get it stopped. In a Chapter 13, you may choose to have your payments withheld by your employer, in which case the Chapter 13 Trustee would notify them of your filing. The chances of success of your Chapter 13 increase when you agree to a wage withholding.
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