The Differences Between Your Bankruptcy Options

Do you need to file for bankruptcy and are confused by the different types that you can use? If so, it helps to know a general overview of the basic differences between Chapter 13 and Chapter 7 bankruptcy before you decide on the one that is best for you.

Chapter 13

The first thing to know about Chapter 13 bankruptcy is that it is a repayment plan where your debts are consolidated to help with paying them back. This type of bankruptcy is used if you do not want a huge impact on your credit score, since many of the debts are paid back to the creditor. 

Qualifying for Chapter 13 bankruptcy requires looking into your income. The court will want to look at your median income over the past six months, as well as your disposable income. Disposable income is defined as the money you have at the end of the month to pay after all major bills are paid. 

Many people complain about Chapter 13 bankruptcy because they are unable to pay the debt even with the repayment plan in place. It can cause them to wish they turned to Chapter 7 and discharged all eligible debts instead. 

One thing to keep in mind is that Chapter 13 cases are often more expensive. It takes more people to monitor that your debts are being paid, which requires the attention of more people. 

Chapter 7

As mentioned, Chapter 7 bankruptcy is great for discharging debts. However, not all debts can be discharged. Things like child support and student loans cannot be discharged, but all of your credit card debt will be dealt with. 

The qualification process is similar for Chapter 7 bankruptcy, since your median income and disposable income is verified to see if you will be eligible. The court will want to see that you do not have the disposable income to pay back your debts under a simple repayment plan. The Chapter 7 bankruptcy process goes faster than chapter 13 though, since the case will be finalized much faster due to not having a repayment plan. Since there is no repayment plan with Chapter 7 bankruptcy, the cases tend to be very successful.

Need help deciding on what kind of bankruptcy will work best for you? Speak to a local bankruptcy lawyer in the area for assistance. They'll analyze your debts and assets so they can give advice on the type of bankruptcy you need


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