There are many important differences between Chapter 13 and Chapter 7 bankruptcy. While Chapter 13 reorganizes arrearages on your mortgage, car loan, income taxes, child support, and alimony of the course of your repayment plan, with a Chapter 7, those balances that are past-due must be settled separately. It’s also required to settle those debts before the completion of a Chapter 7 bankruptcy in order to avoid foreclosure, repossession, and other consequences.
Another aspect is to be careful of is cosigners on financed properties such as vehicles. Under Chapter 7, losing those properties to repossession can have a negative impact on your cosigner’s credit. Chapter 13 protects your cosigners from the negative credit reporting that takes place and collection attempts by your creditors.
Chapter 13 also offers the additional opportunities for lien-stripping, which allows you to discharge secondary mortgages if you own more on your home than what it’s worth. Chapter 7 bankruptcy does not afford you this option.
Under Chapter 13 bankruptcy, eligibility is much less strict than the requirements surrounding Chapter 7. While Chapter 7 requires you to pass a means test or make less than your state’s median income, Chapter 13 does have these same requirements. With Chapter 13, you will need to provide proof that your income will allow you to pay the minimum amount of your debts for your repayment plan.
When filing for Chapter 13 bankruptcy in Reno, you will also have a limit to how much unsecured debts you are able file. With debts such as credit cards and medical bills, they must be less than $394,725, while secured debts like mortgaged homes and financed vehicles must be less than $1,184,200.