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Chapter 7 vs. Chapter 13 bankruptcy

On Behalf of | May 17, 2024 | BANKRUPTCY LAW - Foreclosure

Individuals who are considering filing for bankruptcy typically do so because they are experiencing severe financial difficulties. However, filing for bankruptcy can have serious long-term consequences for your credit rating and finances, making the prospect of doing so intimidating and overwhelming.

Understanding your alternatives is the first step toward rebuilding your financial future, even if it will take some time to recover from bankruptcy.

What options do I have?

Chapter 7 and Chapter 13 bankruptcy are the two most prevalent forms. Each has its own set of guidelines and outcomes.

Chapter 7 bankruptcy is also known as liquidation. If you file for this type of bankruptcy, you may be required to sell some of your belongings to pay off your debts.

    • One spouse can file separately, or married couples can file together.
    • Once you file for Chapter 7 bankruptcy, creditors are prohibited from contacting and bothering you.
    • Unsecured debt is typically charged off, meaning you are no longer obligated to repay it.
    • Your credit report will show Chapter 7 bankruptcy for up to ten years. During this time, you will need to focus on rebuilding your credit.
    • After 10 years (or sometimes earlier), bankruptcy will be removed from your credit report, giving you a fresh start.

Chapter 13 bankruptcy is commonly known as restructuring bankruptcy. This type of bankruptcy allows the debtor to keep their assets if they agree to the court-approved repayment plan, which lasts three to five years.

      • To be eligible for this repayment plan, the debtor must demonstrate that they have a consistent income.
      • A trustee will be appointed to oversee your payments and assess your financial situation.
      • Any outstanding unsecured debt is forgiven at the end of the repayment plan, provided it is completed successfully.

If you’re thinking about filing for bankruptcy, seek assistance with exploring your alternatives.