Which bankruptcy is right for me: Chapter 7 or Chapter 13?

On Behalf of | Aug 2, 2021 | Bankruptcy |

Declaring bankruptcy is a complicated legal process that affects your credit and finances for a long time.

There are different types of bankruptcy filings. It is crucial to determine the right option for your circumstances before you move forward.

What is a Chapter 7 bankruptcy?

A Chapter 7 bankruptcy is a legal liquidation that provides a way to discharge most unsecured debt. It involves selling some of your nonexempt property to pay the bills you owe. This type is a good option for people who do not have disposable income or sufficient equity to repay debts.

Some things to consider include:

  • It can reduce your monthly repayment amounts
  • It typically takes about four months to complete
  • It can stop debt collectors from contacting you
  • It remains on your credit for up to ten years
  • You may lose non-exempt assets

What is a Chapter 13 bankruptcy?

A Chapter 13 bankruptcy is a reorganization option that allows you to retain secured assets like your car or house. This type is for people who have reliable incomes. Chapter 13 requires you to create a long-term repayment plan that will pay off your debt in three to five years. You make one payment each month for distribution among your creditors.

Some key points to consider:

  • It can stop the foreclosure process
  • It helps you repay your debt
  • It may strain your monthly budget
  • It typically takes up to five years
  • It stays on your credit rating for seven years
  • It requires consistent monthly payments

Choosing to file bankruptcy is a serious decision with many financial consequences. It is critical to understand the bankruptcy laws and weigh the pros and cons of each filing type before taking legal action.