Chapter 7 vs. Chapter 13 Bankruptcy

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If you're like most people considering bankruptcy, you'll probably need to choose between filing a Chapter 7 or Chapter 13 bankruptcy. For most people, Chapter 7 is the simpler, less complicated and less expensive way to go. There are situations though, where Chapter 13 is the better option. Here are both in a nutshell:

Chapter 7

In a Chapter 7 bankruptcy, most of your debts are discharged in a few months, but you risk losing property if you have a lot of non-exempt equity in property that could be sold to raise money for the benefit of your creditors. A Chapter 7 case is over in about 60-90 days, after which you will get a notice of discharge and will no longer be liable to repay most of your debt.

Chapter 13

A Chapter 13 is usually better suited if you have a regular income and have non-exempt property that you want to protect. In a Chapter 13 bankruptcy, you create and start paying into a monthly payment plan that can last three or five years. This payment plan is calculated by taking into account your monthly disposable income, as well as the type of debts you owe. Some debts, like most recent tax debts, family support debts and student loan debt must be repaid in full. The rest, like your credit card debt, personal loans, medical bills, payday loans and other common unsecured debts will be repaid in full or in part depending on how much money is left over.

Check out the following links to get in-depth information on both types of bankruptcy.