If you feel like you are drowning in debt, you may start to consider filing bankruptcy. However, how can you know if bankruptcy is the right choice? Or what type of bankruptcy you should file? Would Chapter 7 be better for your circumstances or Chapter 13?
Chapter 7 bankruptcy
Chapter 7 bankruptcy is good for those who have thousands of unsecured debts. If you already had trouble paying down your medical bills last spring and then lost your job, causing you to rack up thousands in credit card debt, you may want to consider Chapter 7. Chapter 7 is best for those who may never be able to get out of debt without filing bankruptcy. It also only takes three to six months to complete.
Chapter 7 is the most popular type of bankruptcy filed. Yet, you must qualify for Chapter 7 through a mean’s test (which will show your income prevents you from paying your debts off). A Chapter 7 bankruptcy also will remain on your credit report for 10 years.
Chapter 13 bankruptcy
A Chapter 13 bankruptcy involves debtors creating a payment plan to pay off their debts within three to five years. Those who go through Chapter 13 may see some of their debts reduced, but they have enough income to pay off the debt they owe over time. Also, a Chapter 13 bankruptcy only stays on your credit report for seven years.
You have a greater chance of keeping your home and other property through a Chapter 13 bankruptcy. Some people choose Chapter 13 bankruptcy if they have incurred medical debt and want to keep the relationship with their health care providers strong.
If you are considering bankruptcy, you should consult a bankruptcy attorney. A bankruptcy attorney can review your finances and debts and help you decide what type of bankruptcy would benefit you most.
