If you are planning to file for personal bankruptcy protection, you have a decision to make between Chapter 7 and Chapter 13.
Both have advantages and drawbacks. Make sure you understand the options before choosing the one that seems the best for your circumstances.
Discharge your debts quickly
If you cannot pay your debts, you may want to file Chapter 7 bankruptcy, which normally takes 90 to 100 days altogether. To qualify, you must first pass the means test showing that you meet a median family income level. Filing will stop creditors from contacting you, collecting money, initiating a wage-garnishing process or suin you. Understand, however, that you are facing the possible loss of assets, including property such as your home.
Keep your property
You can keep your home and other kinds of property if you file Chapter 13 bankruptcy. If you are a steady wage earner and do not qualify for Chapter 7, filing Chapter 13 may be the solution for your particular circumstances. In this process, you will repay some if not all your debts through a payment plan. The procedure is for you to make one monthly payment, which your trustee will distribute among your various creditors. Chapter 13 is not as swift a plan as Chapter 7; resolving your debts in this manner will normally take three to five years. However, as compared to Chapter 7, creditors normally view this type of bankruptcy in a more favorable light as long as you can continue making timely payments.
Mark your calendar
If you file for Chapter 7, you should understand that this type of bankruptcy can remain on your credit report for as long as 10 years, while for Chapter 13, the duration is no more than seven years. In either case, you can still acquire credit cards or qualify for a mortgage or other type of loan, but keep in mind that you will pay higher interest rates.