Chapter 7 and Chapter 13 are two different types of bankruptcy filings available to individuals across the United States. Each chapter offers distinct advantages and potential drawbacks, depending on a person’s financial circumstances.
It is generally a good idea to seek legal guidance before committing to one approach over the other, as the bankruptcy process is very nuanced. However, learning about each option’s advantages is a great way to start researching debt relief options if you’re struggling to repay your obligations.
Chapter 7 advantages
Chapter 7 is uniquely available to low-income filers. Some of its advantages include:
- Speed: Chapter 7 bankruptcy typically concludes within a few months, allowing for a fresh start quickly.
- Debt discharge: Many unsecured debts, such as credit card and medical bills, can be completely eliminated, providing significant debt relief.
- No repayment plan: There is no requirement to repay creditors through a structured repayment plan in Chapter 7 bankruptcy.
- Simplified process: Chapter 7 involves a straightforward and less complex process compared to Chapter 13 bankruptcy.
Although there is a risk of having non-exempt assets sold to repay creditors, very few filers end up having any of their property sold during the Chapter 7 process. Our attorney will review your assets with you at the initial meeting to determine that we can in fact protect your assets.
Chapter 13 advantages
Chapter 13 bankruptcy works well for those who earn a steady income. The advantages of this process include:
- Repayment plan: Chapter 13 involves a court-approved repayment plan lasting three to five years, which enables individuals to pay off their debts gradually while keeping their assets safe from the risk of liquidation.
- Avoiding foreclosure or repossession: Chapter 13 bankruptcy can halt foreclosure proceedings, giving debtors an opportunity to catch up on missed mortgage payments and potentially save their homes.
- Flexibility: Chapter 13 provides flexibility in negotiating with creditors and modifying payment terms, making it easier to manage debts effectively moving forward.
The choice between these two opportunities depends on individual circumstances including income and assets. You’ll want to examine your financial circumstances carefully before making any firm decisions.