“What’s the difference between a Chapter 7 and a Chapter 13 bankruptcy?”
My name is John Watts, and I’m an Alabama consumer protection attorney. Even though we don’t really do bankruptcy, it’s a topic that we are asked about fairly often.
We’d like to give you a simple overview of what a Chapter 7 and a Chapter 13 bankruptcy are in Alabama.
A Chapter 7 bankruptcy is also referred to as a “straight bankruptcy.”
This is where you wipe out your debt completely, except the the ones that can’t be wiped out.
In a Chapter 7 bankruptcy, you have the protection of bankruptcy court, then you have what’s called a “meeting of the creditors,” or a 341 meeting.
As the name suggests, this is where the creditors meet with you and the bankruptcy judge (or in most cases a trustee who works for the bankruptcy judge), to look at all of your debts and information to see if you qualify for a Chapter 7 bankruptcy.
Some types of debt aren’t eligible for discharge, which we talk about in other articles.
You may be able to wipe out a mortgage debt, however your home/vehicle/property can still be taken from you.
This process takes a few months to complete.
A Chapter 13 bankruptcy is also known as “debtor’s court.”
The idea here is that you’re making payments into court. You can think of it as a “reorganization” of your debts.
Just like some companies will file bankruptcy to reorganize their debts.
Usually when this kind of bankruptcy is filed, the court will set up a plan for you to pay back your debts.
They help sift through how much interest you should pay on the debt, what debts are secured and unsecured, etc.
Conceptually, this is where you’re protected by bankruptcy while you make payments over time, usually about 5 years.
We hope this is helpful to you!
If you live in Alabama and you have any questions, feel free to get in touch with us.
We’d be glad to help you in any way we can.
You can reach us by phone at 1-205-879-2447, or you can fill out a contact form and we will get in touch with you quickly.
Thanks for reading, and have a great day!