Chapter 7 vs. Chapter
13 Bankruptcy
September 17, 2012 by King and King Bankruptcy Attorneys
The two most commonly used types of bankruptcy are called Chapter7 bankruptcy and Chapter 13 bankruptcy. The one that you will file depends on
your situation. The first is Chapter 7 bankruptcy.
In Chapter 7 bankruptcy, any unexempt property will be
liquidated and turned over to a trustee. The trustee converts it to cash and
then pays your creditors. Do not
worry—exemptions are generous and we are able to protect all of our clients’
property in almost every case.
You will most likely be advised to file Chapter 7 bankruptcy
if you do not have enough disposable income to pay your obligations via a
payment plan or if you are unemployed.
Chapter 7 Bankruptcy
Advantages
Chapter 7 bankruptcy is a straightforward process. After the
liquidation process, the trustee is expected to process your discharge from
debt. After the discharge, your creditors do not have any claim on your future
earnings or properties and possessions, so you truly get a fresh start.
Credit Impact
Chapter 7 bankruptcy’s major credit impact is that it lowers
your credit score, and it stays in your record for up to 10 years. However, you
should be able to rebuild your credit immediately after discharge and in most
cases have a credit score higher than before bankruptcy within just a few years.
Chapter 13
Bankruptcy:
This type of bankruptcy is available to individuals with
disposable income. With a Chapter 13 bankruptcy, your creditors will work with your
bankruptcy attorney, your Chapter 13 Trustee, and the Bankruptcy Court to
restructure your debt and create a repayment plan. These payments can last 3 to
5 years, depending on the agreed plan.
Chapter 13 Bankruptcy Advantages
The biggest advantage of Chapter 13 is that you get to keep
your assets, including properties. This can also be done with Chapter 7 using
exemptions. Chapter 13 can also stop the
foreclosure on your home, repossession of your car, wage garnishment, and it
gives you more time to pay off your debt.
