CH 7 vs CH 13 differences?

[MyFico_704]

My understanding is that CH 7 wipes out all of your unsecured debt.  CH 13 allows you to reorganize/restructure you debts. Interest accrual is stopped and you make arrangements for repayment based on income.

Please comment if I missed anything?

Question - Do both of these impact you FICO score exactly the same way?  I'm guessing that CH 13 would not be as damaging as CH7, since 13 is restructuring and you intend to PAY YOUR DEBTS.

Comments please?

[Anonymous]

You are correct, but very much incomplete.

There are quite a number of differences, but I'll just highlight some 'biggies':

• Chapter 7 has lower limits on how much and which personal property you can keep. The rest MUST BE liquidated and paid out to creditors; in Chapter 13, it's generally possible to reaffirm most secured property (home, autos, etc), and continue to pay for them within the plan.

• Chapter 7 stays on your credit reports for 10 years from date of discharge; Chapter 13 stays on your credit reports 7 years from date of confirmation (so, only 2-3 more years after discharge).

• Chapter 13 demonstrates an ability and willingness to repay part/all of your debts; many creditors will favor Chapter 13 survivors over Chapter 7 filers, who walked away from their debt.

Message Edited by oldhack62 on 06-29-2009 01:55 PM

[MyFico_704]

So "reaffirm" means to continue with payments that were previously suspended?  Can you please elaborate..?

Thanks.

[Anonymous]

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@MyFico_704 wrote:

So "reaffirm" means to continue with payments that were previously suspended?  Can you please elaborate..?

Thanks.

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Yes, when you reaffirm you basically are saying, "I still intend to pay this debt", usually (but not necessarily) inside the Chapter 13 payment plan.

[Anonymous]

You can re-affirm debts in a chapter 7 also, though I don't recommend it on anything you're behind on.

What you keep isn't defined by which one you file, but by how many assets you have and how your lawyer applies the exemptions that you have to what you own.  If you're current on a house and your exemption plus what you owe on the mortgage are equal to what the house is worth, you can reaffirm the debt and keep the house.  Retirement accounts are GENERALLY off limits to creditors in bk, unless they assert that contributions were fraudulent.  Of course every district has different exemptions.

REMEMBER, THIS IS NOT LEGAL ADVICE.

[Anonymous]

I believe the score hit is the same.  On the myfico simulator, it does not differentiate between different types of bankruptcy.  Ch. 13 BK can be an 80 point hit - depending on where your score is when you file. 

Of course, the hit for ch. 13 is 7 years because it stays on your report that long; the hit for ch. 7 is 10 years from filing - so that definitely matters. 

Ch. 13 has a 3-5 year repayment plan; so the dismissal date is 3-5 years after filing.  It seems that mortgages, cc's want to wait a given period of time After Dismissal before they'll take you on - so a later dismissal date matters.

You also have to meet certain criteria to determine if you fit within the guidelines for ch. 13 or ch. 7.

Message Edited by utah2009 on 07-01-2009 04:22 PM

[Anonymous]

When we app'd for a mortgage, we were told that a Ch.13 is looked upon more favorably than a Ch.7, because it included repayment and a payment history.  YMMV.