Ch 7 or 13

[special111]

I am just wondering does a ch 7 look worse then a ch 13? I was recently told that companies see chapter 7 as more punitive then ch 13, when trying to rebuild. Does anyone know if this is accurate? I am no where near rebuild right now just wondering?

[justbroke]

I am just wondering does a ch 7 look worse then a ch 13? I was recently told that companies see chapter 7 as more punitive then ch 13, when trying to rebuild. Does anyone know if this is accurate? I am no where near rebuild right now just wondering?

Technically speaking a Chapter 7 stays on your credit report for 10 years whereas a Chapter 13 remains for 7 years. However, I can personally tell you that my bankruptcy only affected me a little when it came to obtaining credit after discharge (in my Chapter 7).

My FICO scores were in the low 700s and high 600s within 2 years of discharge. The only nice thing would have been that if I had been discharged from a Chapter 13, it would have already been removed from my credit reporting. My Chapter 7 remains until 2018, while my Chapter 13 would have remained until 2015!

I'm just curious as to your source of information? From every indication that I have read and experienced, bankruptcy is bankruptcy is bankruptcy. The only difference is when it falls off your credit report.

[special111]

Thanks that was information given to me by someone who filed chapter 13. It seemed a little ridiculous to me but I thought I would ask.

[justbroke]

I find that some creditors, debt management companies, and even banks have been pushing the idea that bankruptcy is the worst thing you could ever do. The worst thing you could ever to do your credit is go 90 days past due and have judgements and liens. In fact, just about anything on the public record (judgement lien, tax lien, bankruptcy), is going to hurt you.

The nice thing about bankruptcy is that it discharges all the debt that you accrued prior to filing (with few exceptions to dischargeability). Within 2 years of a discharge, you can quite easily be back in the high 600s and possibly low 700s if you are able to rebuild quickly. Within 6 months after filing, Navy Federal gave me a vehicle loan (refinance) for about 7.5%. That was incredible since my pre-bankruptcy rate was over 14%.

[leonel9]

Not sure if this helps further the conversation... but recently my mother received an application for a rental property she owns. The applicants were in a CH13 plan at the time, and their agent positioned it as if it were the most honorable thing one could do. She said something like, "Applicant has voluntarily entered a CH13 plan to repay as much as she can, vs. walking away from the debt in a CH7."

In addition to not buying that the applicants chose CH13 over CH7 for purely guilt reasons, my mother was concerned that if the CH13 plan didn't work out, she may be left with a tenant who would possibly have financial troubles down the road.

In this example, the renters would have had a stronger application if the received a CH7 discharge. Less risk of plans not working, possibly more available income, and more protection for landlords/creditors post-discharge.

Just my two cents.

[Ruthdavis]

Most companies file for chapter 11 and I think that is the ideal type of BK for them. In this plan, a company can establish a reorganization plan and continue operating. Companies that file for chapter 7 have no hope of resuming as a viable business and maybe that is the reason why they keep saying that.

[Chrysalis]

I agree with leonel. From what I have gathered, when you file Chapter 7 -- potential creditors see that you have zero (or way, way less) debt, and no ability to file Chapter 7 again for another eight years. However, when you are in a Chapter 13, you still have that debt, and you CAN choose to get out of your Chapter 13 at any time. When Chapter 7 is done, it's done and over in a relatively short time. There are a ton of variables and unpredictability with a 13, because *no one* knows what is going to happen over the next 3-5 years that could change your situation and your ability to stick with the plan. A quote I saw from a judge the other day was that 65% of 13's fail for one reason or another -- and if I were, say the landlord as described above, that would look more shaky to me than someone who had filed 7 in the past, and was now able to show financial stability because of it.

[Ruthdavis]

Chapter 13 is ideal for past due payments (mortgage or car payments). It helps people keep the assets they need. If you have a regular income, this plan is good for you. Chapter 7 is created to help low income debtors manage their debts. It's a matter of your own perspective. Both have pros and cons.