When debts get out of control for someone in Pennsylvania, sometimes he or she needs to consider the option of bankruptcy. Whether someone chooses to file Chapter 7 or Chapter 13 bankruptcy depends on which is better for his or her situation.

What is Chapter 13 bankruptcy?

United States Courts state that under chapter 13, debtors have a chance to get some of their assets liquidated. However, some payments will still need to be on-time, such as a mortgage, for example. For reasons like this, Chapter 13 is sometimes referred to as a wage earner’s plan.

Unless the court approves a longer period, the timeline for chapter 13 spans over three years. The debtor proposes a repayment plan, and the court will look at the debtor’s current monthly income when deciding whether or not to grant the plan.

What is Chapter 7 bankruptcy?

In chapter 7 bankruptcy, all of the debtor’s non-exempt property will be liquidated and used to pay off creditors. Only individual debtors may file for chapter 7.

The debtor must have received credit counseling from an approved agency within 180 days of filing for bankruptcy under chapter 7. The aim of bankruptcy under chapter 7 is to give an individual a fresh start.

Comparing the two

There are many differences between chapters 7 and 13, but the most striking one is that in chapter 7, the court appoints an impartial trustee to administer the case. In chapter 13, on the other hand, it is up to the individual and his or her counsel to draft a repayment plan to propose to the court.