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Chapter 7 versus Chapter 13 bankruptcy: Which is right for you?


If you are burdened by debt, you should learn more about the differences between Chapter 7 and Chapter 13 bankruptcy.

February 08, 2014 /24-7PressRelease/ — If you are overwhelmed by debt, bankruptcy could help you get your financial life back on track. But which type of bankruptcy is best for you?

Generally, there are two types of consumer bankruptcy, Chapter 7 and Chapter 13. Each has its own distinct advantages, and depending on your unique situation, either could be a better fit.

Chapter 7 offers a quick discharge of debt

Chapter 7 bankruptcy is a good choice to secure a quick, clean escape from debt. In a Chapter 7 case, most types of debt are discharged almost immediately. The potential downside of Chapter 7 is that a Chapter 7 case can involve liquidation, in other words, the sale of a filer’s nonexempt assets to partially repay creditors before a discharge is granted.

However, there is a generous array of exemptions for various types of assets, from a motor vehicle to a certain amount of equity in a home. Many Chapter 7 filers do not have to give up any assets at all. If you do not own a great deal of valuable property, Chapter 7 bankruptcy probably represents the best and quickest way out of debt.

Chapter 13 can keep valuable assets intact

Chapter 13 bankruptcy differs from Chapter 7 in a number of important ways. For one thing, Chapter 13 bankruptcies typically do not involve liquidation. But, a Chapter 13 case is not wrapped up as quickly and neatly as a Chapter 7 case.

When you file for Chapter 13 bankruptcy, you and your lawyer will propose a repayment plan to the court that spans a three to five year term. Under the repayment plan, your debts will be consolidated, and your payments may be lowered. If you live up to the terms of the court-approved plan, at the end of the three to five year term, most types of remaining debt will be discharged.

Chapter 13 can be a good option for those filers who carry a heavy debt load, but have a regular income. Chapter 13 can be particularly advantageous for those who have significant assets. If you are facing foreclosure and wish to save your home, Chapter 13 offers another special benefit: by filing for bankruptcy, an automatic stay goes into effect, which stops all collection actions, including foreclosure. Then, as part of your repayment plan, you can make up for past due mortgage payments. As long as you keep up with your mortgage payments over the course of your repayment plan, you can defeat the foreclosure action.

Take the next step, and get in touch with a bankruptcy lawyer

Which type of bankruptcy is right for you? Now that you have a general understanding of the differences between Chapter 7 and Chapter 13, you might have an idea of which is best for you. But, only an experienced bankruptcy attorney can fully assess your situation and help you make the right decision.

Bankruptcy can help you eliminate debt and get a fresh start. Talk to a bankruptcy lawyer today to learn more about the differences between Chapter 7 and Chapter 13 and to get your case underway.

Article provided by Charles E. Covey, Attorney At Law
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