If you need to use bankruptcy to get yourself out of debt, you may be wondering which form of bankruptcy you should use. Many individuals end up picking between Chapter 7 or Chapter 13 to deal with their financial woes and asking themselves the following questions to help them decide.
Are You Currently Employed And Making Decent Money?
One of the main differences between Chapter 7 and Chapter 13 bankruptcy is that Chapter 13 requires a repayment plan in order to solve your financial problems. Many debts are consolidated and put into a single repayment plan that you are required to make monthly payments towards, with many debts being a portion of what you would normally owe.
However, not everyone is able to make payments towards a repayment plan. It does require that you are employed and making a decent amount of income that allows you to pay for your current bills and make those payments towards your repayment plan.
Which Form Of Bankruptcy Impacts Your Credit The Least?
Since Chapter 13 bankruptcy involves paying back a lot of your debts, you'll find that it has the least impact on your credit, Chapter 13 will go away after 7 years, while Chapter 7 goes away after 10 years. While Chapter 7 lasts longer, keep in mind that part of using that form of bankruptcy means that many of your debts will be completely discharged without repayment.
Will You Lose Property With Either Form Of Bankruptcy?
Be aware that Chapter 7 bankruptcy requires you to sell the property that is nonexempt in order to pay back as much debt to creditors as possible. This is necessary because many of the debts are discharged and do not have to be paid back. Many people that use Chapter 7 bankruptcy do not have a car or home that they own, so this is not a concern for them. Meanwhile, Chapter 13 bankruptcy does not require you to liquidate assets, which means you can keep your home, car, and other major assets.
Will Credit Card Debt Be Discharged?
The good news with both forms of bankruptcy is that your credit card debt will be discharged. This is likely one of the biggest forms of debt that you have, and since credit card debt is unsecured, it will not be a problem having it included in either form of bankruptcy.
Ask your bankruptcy lawyer if you have more questions about using Chapter 7 or Chapter 13 bankruptcy.