The Differences Between Filing Chapter 7 and Chapter 13 Bankruptcy and Finding the Right Option for You
When it comes to personal bankruptcies in the United States, many people don’t quite understand the process works until it’s too late. As a result, some debtors may find themselves in tight situations where they have to make a decision about their future fast, especially if they don’t know the difference between Chapter 7 and 13 bankruptcy. While hiring a bankruptcy attorney is one of the first steps to filing with the U.S. Bankruptcy Court, anyone who has gone into debt should think about exactly what outcome would be preferable once that filing is complete.
This isn’t a decision to be made overnight, so if you have found yourself in debt, take the time to think about your future. Here are three questions to ask yourself to determine whether you should be filing Chapter 7 bankruptcy or filing Chapter 13 bankruptcy:
1. Can I pay back my debt over time? The amount of debt you would have to pay back is a big factor to determine filing Chapter 13 bankruptcy. Chapter 13 is a reorganization of debt, so you would work with creditors to establish a payment plan, usually over three to five years. If you know that you are unable to pay back debt, especially if you have experienced a loss of income, then Chapter 7 may be a better choice — especially if you don’t see that hardship changing anytime soon.
2. Do I have any property or other assets I need to keep? Most people who are in debt have yet to pay off their mortgages. This unsecured debt could put them at risk for losing their homes if they declare Chapter 7 bankruptcy. In these cases, filing Chapter 13 may be a better choice. However, if you are looking to eliminate all debt, including mortgage debt, or if the mortgage is paid, then Chapter 7 could be a better option.
3. Do I need my debt forgiven quickly so I can move on from my bankruptcy? Finally, take into the account the timetable for your debt forgiveness. Chapter 7 will take effect immediately once it has been approved. Chapter 13 bankruptcies, however, can take at least three to five years to pay back, on average. The sooner your bankruptcy is declared, the quicker, in general, you can move on from that debt.
If you have other questions about filing for bankruptcy, or if you need help making the above decisions, it’s best to speak with a bankruptcy lawyer about your situation. All bankruptcies are different, so it’s important to get advice that pertains to your circumstances only. Have any general inquiries? Leave a comment below. Helpful info also found here.