Chapter 7 Compared to Chapter 13
An individual who files for Chapter 7 bankruptcy must provide evidence that he or she cannot repay creditors and meet basic requirements. Only when a person's income has changed can he or she be eligible to convert to Chapter 13 bankruptcy. Additionally, a debtor with unsecured debts exceeding $360,475 is ineligible to apply for Chapter 13. According to the U.S. Bankruptcy Court, a debtor with secured obligations totaling more than $1,081,400 cannot also file for Chapter 13 bankruptcy.
After Chapter 7
A debtor who has been discharged from Chapter 7 bankruptcy cannot convert to Chapter 13 bankruptcy. Extremely rarely does the bankruptcy court approve a Chapter 13 petition immediately following a Chapter 7 discharge. Typically, you must wait four years after a Chapter 7 discharge to submit a Chapter 13 petition, and you cannot file another Chapter 7 petition until eight years have passed.
Possible Costs
The filing fee for Chapter 7 bankruptcy is $299 unless it is waived. There is currently no fee for converting a Chapter 7 case that has not yet been discharged into a Chapter 13 proposal. In contrast, if the case has already been discharged, a Chapter 13 filing fee of $274 must be paid. Filing for a Chapter 13 plan may also require the assistance of an attorney, which may incur additional costs of hundreds or thousands of dollars.
Credit Score
Filing for bankruptcy has a negative impact on an individual's credit score with TansUnion, Equifax, and Experian. In actuality, credit ratings are negatively impacted whenever an individual declares bankruptcy. Moreover, even if a bankruptcy case is unsuccessful, it will still have a negative impact on a person's credit rating; therefore, it is necessary to carefully consider all factors before filing any form of bankruptcy case. In the case of Chapter 7, a bankruptcy remains on the credit report for up to 10 years after the date of discharge, whereas in the case of Chapter 13, it remains on the credit report for up to 7 years after the date of discharge. In addition, if a person converts to a Chapter 13 case and the repayment plan is incomplete, court permission is required to open new credit accounts. A Chapter 13 plan typically takes three to five years to complete, whereas a Chapter 7 bankruptcy typically takes a month or more to complete.
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