Different chapters of bankruptcy provide different types of protection. Most individuals who are struggling with debt will file for either Chapter 7 or Chapter 13 bankruptcy protection. Understanding the differences between the two is important for determining the best financial path forward for your situation.
Chapter 7 can discharge debt quickly
Chapter 7 bankruptcy is also known as liquidation bankruptcy. This form of debt protection enables you to discharge most secure debt relatively quickly. There are income limitation requirements that must be met to be eligible for Chapter 7 protection. This type of bankruptcy is usually best suited for people with low-paying jobs or for those who are out of work.
Chapter 13 can help you pay off debts over time
Chapter 13 bankruptcy is also known as reorganization bankruptcy. This form of debt protection enables you to catch up on your financial obligations. You can accomplish this through an affordable repayment plan. The repayment plan will last for a period of three to five years. This form of bankruptcy is best for people who are earning a steady income.
Each type of bankruptcy has its advantages and disadvantages
Chapter 7 is useful for providing you with a clean slate quickly. However, you may lose a significant amount of your assets. Chapter 13 is a slower process. However, if you have fallen behind on your mortgage or auto payments, this can provide you with the time you need to catch up, potentially allowing you to save more of your assets.
Everyone’s financial situation is unique. You should discuss your available options with a skilled professional.