You may have noticed that consumer bankruptcy comes in two different versions: chapter 13 and chapter 7. They are very different and serve different purposes, so knowing some facts about each type should be mandatory reading before you make your final decision. Read on for a quick primer about each type and decide for yourself.
Known as a debt reorganization plan, this type of bankruptcy is best for those who want to work with their creditors to pay off at least a portion of their debt obligation. The idea is too take the debt load and negotiate to reduce it and to spread the remaining amounts over a longer period of time. This type of filing is ideal for those who may have higher incomes, since chapter 7 places limits on who can file based on income; chapter 13 places no such limits.
You also stand to lose less property with this form of bankruptcy, particularly if you can prove that that property could produce income, such as rental properties. Chapter 13 plans take a lot more time to complete and be final than chapter 7, however. For those who want to take full responsibility for their debts, this form allows them to do so, and may look more attractive on the credit report than a chapter 7 filing. It should be noted that both chapter 13 and chapter 7 bankruptcies can remain on your credit report for about 10 years.
Known as a liquidation bankruptcy, the idea of a chapter 7 is too use some of your property to pay off your creditors. There are, however, regulations about how much can be seized and each state allows filers to use exemptions to lower the value of their property in an attempt to hold on to as much as possible. If your income fits into the median range for your state and your exemptions allow you to lose very little property, this type of filing could work for you. No other form of bankruptcy can make your debt load virtually disappear overnight than with a chapter 7 filing.
Additionally, this type of bankruptcy takes a mere matter of months to be complete, depending on the size of your case and your local federal case load. Since both types of bankruptcies stay on your credit report for the same period time, you may opt to get more "bang for your buck" by going with a chapter 7 bankruptcy, especially if you have a lot of credit card debt. For more information, contact a professional such as Stuart R Whitehair Attorney.