What is the difference?
The vast majority of filings are Chapter 7 filings. These are preferred by debtors because Chapter 7 cases generally result in the cancellation of your debt. The legal term is the discharge of your debt. In fact, the ultimate goal of a Chapter 7 case is to obtain an Order of Discharge from the Bankruptcy Judge.
Chapter 13 cases are more complex. In a Chapter 13 case, you are seeking to pay off a portion of your debt over a period of time. If you make above a certain some of money, a Chapter 13 case may take either 3 years of 5 years. In other words, you make payments to the Trustee pursuant to either a 3 year plan or a 5 year plan.
Once you make your payments into the plan, all the remaining debt is discharged.
The problem with most Chapter 13 cases is that many things can happen over a 3 or 5 year plan. If you lose your job or have a health problem or end up in divorce court, and you fall behind on your payments, the case may be dismissed by the court. When this happens, your lawyer has to take certain actions to protect your interests.
So why do Chapter 13? Because you might make too much money to qualify for a chapter 7 by virtue of the Means Test. I will give you much more details about the Means Test in some future posting.