Differences Between Chapter 7 and Chapter 13 Bankruptcy in Minnesota

The best debt relief option for most clients is through Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Both solutions offer Twin Cities individuals and families the opportunity to get out from under crushing debt, either through a fresh start in Chapter 7 or through debt restructuring and partial repayment with Chapter 13. Your Twin Cities bankruptcy lawyer at Martin & Hedervare PLLC can advise you on the most practical course of action based on your unique circumstances.

Two great paths to a debt-free future

In both Chapter 7 and Chapter 13, you can discharge credit card balances, medical expenses, personal loans and other big bills permanently, stopping collection agencies and wage garnishments immediately. As soon as the bankruptcy process begins, clients can see the light at the end of the debt tunnel.

When Chapter 7 bankruptcy is the right choice for you

Chapter 7 bankruptcy is the more common choice. In 2016, almost 7,800 of the 9,200 bankruptcies filed in Minnesota were Chapter 7, along with 61.7% of all non-business bankruptcies nationwide. There are numerous benefits to filing for Chapter 7:

  • Time to completion: Chapter 7 bankruptcy is finished in just 3-6 months after filing with the bankruptcy court. Clients can look forward to being debt-free in the very near future.
  • What you put in to your bankruptcy case: Possible dischargeable debts in Chapter 7 include credit card, medical and personal loan payments. You will also surrender any non-essential assets you own or have significant equity in, such as a paid-off or mostly paid off home or car as well as items like heirlooms and jewelry.
  • What you get out when bankruptcy is over: You are free from discharged debts and can move forward with a fresh start. Those debts are eliminated, and those creditors will not contact you again. The money you earn at the conclusion of your Minnesota bankruptcy case is yours to keep. If you were involved in foreclosure proceedings prior to filing for bankruptcy, however, you may be required to continue working on that issue.

Chapter 7 is best for:

  • Those with few assets to lose
  • Those who do not own a home or homeowners with little equity in their home
  • Those without regular or sufficient income

Chapter 13 bankruptcy is a viable option

Those who do not pass the means test in Minnesota or those who have filed for Chapter 7 bankruptcy in the last 8 years are not eligible to file for Chapter 7. It may also not be the best option for those who own homes and luxury properties. Chapter 13 bankruptcy differs from Chapter 7 in a number of significant ways:

  • Time to completion: Chapter 13 bankruptcy is finished in 3-5 years after filing with the bankruptcy court. The proceedings themselves take just a few months, but the client ends up with a repayment plan to pay a portion of the debt back in affordable installments over the next 3-5 years.
  • What you put in to your bankruptcy case: There are a few debts that can be discharged in Chapter 13 that cannot be discharged in Chapter 7. You may also be able to include some past-due payments and other contractual debts. In Chapter 13 bankruptcy, you do not have to surrender any of your properties.
  • What you get out when bankruptcy is over: You will pay a reasonable amount toward your newly restructured debt. At the end of the repayment term, no matter how much has been paid off, your remaining debt will be discharged and you can move on with your life.

Chapter 13 is best for:

  • Homeowners and owners of second homes, boats and luxury items
  • Wage earners
  • Those who have filed for bankruptcy within the last 8 years

Contact a Twin Cities debt relief attorney today

Every financial situation is unique and requires an experienced, diligent bankruptcy attorney. Find out the debt solution that is right for you by calling Martin & Hedervare PLLC at 651-424-0384 or contact us online today to schedule your free in-office consultation.

About the Author: Marie Martin
Marie F. Martin is an experienced bankruptcy attorney serving the Twin City area. She represents Minnesota families in bankruptcy court, and has handled thousands of Chapter 7 and Chapter 13 cases from beginning to end.