The Difference Between Chapter 7 and Chapter 13 Bankruptcy in Massachusetts

Perhaps you find yourself in a difficult situation where you continue falling deeper and deeper into debt. Your credit cards are maxed out, and the monthly bills keep piling up. It feels as if each month you are falling further and further behind. If you are considering personal bankruptcy as an option it's important that you understand the types of bankruptcy that exist and what each type entails.

There are two types of personal bankruptcy filings, Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a liquidation proceeding. The borrower hands over all non-exempt assets to the bankruptcy trustee who then converts it to money for payment to the collectors.

If you are in a situation where you are able to sell some of your property to pay off your creditors, then Chapter 7 could be an option for you. Consulting with an attorney that handles Chapter 7 bankruptcy is a good idea to better understand your options.

One of the key functions of Bankruptcy Law is to allow someone, who is hopelessly burdened with debt, a fresh start by wiping out their debt.

Chapter 7 bankruptcy is a relatively short process. It can be handled in 6 months or less from the date of the bankruptcy filing in the majority of cases. Chapter 7 is the most common type of personal bankruptcy filed. After declaring chapter 7 bankruptcy, it may be challenging to obtain credit for several years, and it is not possible to file for personal bankruptcy again for a set amount of time.

It has become more challenging to file for chapter 7 bankruptcy in the US, thanks to laws which drastically stiffened the bankruptcy policies in the early 2000s. It is a good idea to speak with both a lawyer and an accountant prior to declaring for personal bankruptcy. Talking to a professional can bring to light an alternative which has not been thought about. In addition, a professional consultation can smooth the way to move ahead with Chapter 7 bankruptcy filings, if you decide this is the best course of action for you.

Chapter 13 Bankruptcy

With Chapter 13, you will be restructuring your debt and work out a payment plan to pay it back. Chapter 13 bankruptcy is filed by individuals who want to settle their financial obligations over a period of three to five years. If you are currently making money, but are not in a position to pay off your debt immediately, you should consider Chapter 13.

In most cases, it is only an option if you have steady earnings and your income is sufficient to pay your reasonable expenses with some amount left over to pay down debt. Speaking to a bankruptcy attorney will help clarify if Chapter 13 or Chapter 7 bankruptcy is the best fit for your situation.

From the author: Massachusetts Bankruptcy Law Firm

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