If you are considering filing for bankruptcy, there are two main forms of bankruptcy under which you may file. Chapter 7 and Chapter 13 are two separate forms of bankruptcy most commonly used by consumers. Depending on the personal circumstances and financial situations involved, each chapter can present distinct benefits and advantages for consumers. It is also important to note that several factors are considered when determining your eligibility for bankruptcy and which chapter you may qualify to file under. An experienced attorney from the David McCormick Law Group can help you during this stage of bankruptcy and can explain which chapter is most appropriate for you.


There are many inherent differences between both chapters of Bankruptcy, but their qualifying criteria are one of the main factors that set these chapters apart. To put it simply, debtors must pass a "means test", which considers their income in relation to the state's median income, in order to be eligible for Chapter 7. Not everyone may qualify for Chapter 7, but most individual debtors whose unsecured debts such as medical or credit card bills are below $336,900 and whose secured debts, such as mortgages or car loans, are less than $1,010,650 can file under Chapter 13. It is important to remember that just because you may qualify for a certain chapter does not mean it is the most appropriate action for you.

Another difference between the chapters of bankruptcy involves their primary use. For example, Chapter 7 bankruptcy, is a liquidation of assets that is commonly used when a consumer has little property aside from the necessities and when they have limited or no funds after paying basic expenses each month. On the other hand, Chapter 13 bankruptcy is an adjustment of debts for a consumer with a regular income, rather than a full liquidation. This means that Chapter 13 is most commonly used when a consumer has a regular income but cannot keep up a consistent payment of their debts or when they wish to restructure mortgages that will allow them to keep their homes.

In addition, Chapter 7 will allow consumers to discharge more of their unsecured debt as opposed to Chapter 13, which typically does not discharge debt and requires consumers to make payment plans to pay them off. When it comes to bankruptcy's effect on credit scores, Chapter 7 will stay on a credit report for ten years from the date of filing and Chapter 13 will remain for seven years.


Anyone interested in filing for bankruptcy should also know that regardless of which chapter they file under, courts will issue what is known as an automatic stay immediately following their filing of a bankruptcy petition. The automatic stay will order creditors, lenders, and third party collection agencies to which you owe your debts to cease all collection activities immediately. This means that you will no longer receive phone calls while the bankruptcy is pending. In the event that your bankruptcy coincides with the foreclosure of your home, all foreclosure proceedings can also be postponed. Both Chapter 7 and Chapter 13 will result in an automatic stay, which can allow you to focus on the bankruptcy process and your plans for a more financially sound future without any additional worries.


Our firm wants anyone considering bankruptcy to understand that there are a variety of factors to be considered before choosing a chapter to file under. By working with us, your case will be evaluated, your goals and objectives will be considered and all aspects of your financial situation will be analyzed to determine which chapter of bankruptcy best suits you and how it can lead to a more financially sound life after bankruptcy. If there are other alternatives to bankruptcy that can benefit you, our firm will explain all the facts needed to make the most-educated decision. If you are considering bankruptcy, we urge you to bring your situation to the attention of an attorney from our firm as soon as possible to improve your chances of a favorable resolution. To discuss your case or to set up a free consultation, contact the David McCormick Law Group today.

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