Personal Bankruptcy Chapter 7

How new laws in personal bankruptcy Chapter 7, and new rules for qualification may help debtors

As a general rule of thumb, attorney fees for personal bankruptcy Chapter 7 cost approximately 60% as compared to Chapter 13. The lower cost in personal bankruptcy Chapter 7 reflects the simplicity of discharging debts in one process, rather than the more complex calculation, qualification, and approval process required to obtain confirmation of a `13 plan. Stated similarly, personal bankruptcy Chapter 7 is a simpler process, costs less, and generally provides greater debt relief in less time.

Notice below that Chapter 7 filings are more than twice as popular as Chapter 13 cases. Personal bankruptcy cases also represent over 99% of all cases filed. The conclusion is clear, by more than a 2 to 1 margin, most individual filers prefer personal bankruptcy Chapter 7 relief over Chapter 13 plans. This preference prompted both houses of US Congress, at the urging of large financial institutions, to propose new laws which restrict qualification for personal bankruptcy Chapter 7. These new laws are expected to become effective at any time.

Personal Bankruptcy Filings by Year & Chapter
Year	Chapter 7	Chapter 11	Chapter 12	Chapter 13
2004	1,137,978	10,132	108	449,123
2003	1,175,905	9,404	712	473,137
2002	1,109,123	11,270	485	455,877
2001	1,054,975	11,424	383	425,292
2000	859,220	9,884	507	383,894

Debtors who elect Chapter 13 must satisfy more qualification restrictions than if choosing personal bankruptcy Chapter 7 options. For instance, to qualify for a 5 year reorganization plan, debtors must prove regular monthly income sufficient to meet proposed plan payments. No such require exists for personal bankruptcy chapter 7.

Long term effects of personal bankruptcy under Chapter 7

Credit reports are allowed to include prior bankruptcy cases for a period of up to 10 years. Most credit reporting agencies include filing data for the maximum period. This 10 year period is calculated from the date of final discharge in both Chapter 7 and 13 (i.e. the end of the case). Because Chapter 13 cases frequently last 5 years, the dread word "Bankruptcy" appears for a total of 15 years on credit reports if filing a 13 case, whereas personal bankruptcy Chapter 7 appears for 10 years. Ironically, debtors who choose to repay debts are penalized by this provision.