Chapter 7 Vs. Chapter 13
When people think of bankruptcy, they typically think of Chapter 7. However, it is important to know that there are options available to fit a variety of circumstances. When it comes to consumer bankruptcy, people may be able to use either Chapter 7 or Chapter 13. Here is a brief overview of some of the distinctions between the two options:
Chapter 7 allows for a fairly quick discharge of debt. The process is often finished in half a year or less. Chapter 13, on the other hand, allows for the creation of a repayment plan that will last from three to five years.
Secured And Unsecured Debt
Chapter 7 is a great tool for tackling unsecured debt like credit card bills and medical bills. Chapter 13 lets you overcome unsecured debt and also allows you to include secured debt such as your mortgage or car payments in your repayment plan.
While exemptions typically allow people to keep most, if not all, of their assets in Chapter 7, there is a possibility of some assets being liquidated in order to pay off debt. A Chapter 13 repayment plan does not require asset liquidation.
If anyone has co-signed on a debt and that debt is discharged in Chapter 7, the co-signer may still be liable for the debt. In Chapter 13, the co-signed debt can be paid off through the repayment plan, protecting the co-signer.
Ideally, you will not have to file bankruptcy again. Unfortunately, real world circumstances often put people in tough financial positions more than once. There are strict time limits on when you can receive a subsequent Chapter 7 discharge. The time frame is much shorter for repeating the Chapter 13 process.
How To Decide Between Chapter 7 And Chapter 13?
For most people, the decision between Chapter 7 and Chapter 13 will be driven by debt load, assets that need protecting and income level. To help you determine the option that makes the most sense in your situation, you should consult an experienced bankruptcy lawyer.