Should You File Chapter 13 or Chapter 7?

by | Jan 14, 2014 | Lawyers and Law Firms

The unfortunate truth is that most people only know the very basics when it comes to filing bankruptcy. They know that you fill out paperwork, they clear your credit report, and you start over. While there is some truth to that way of thinking it is not really that simple. In fact, the first thing you have to figure out is whether you are filing for Chapter 7 or Chapter 13.

What Is Chapter 7 Bankruptcy?

Chapter 7 is the most common type of bankruptcy that a person can file. You file this bankruptcy when you want to have all of your debts discharged. This just means that any and all of your unsecured debts will be removed from your credit history and you will not be responsible for paying them. You are required to give up valuable assets so the court can liquidate them in order to give the creditors some of their money back. Each and every state has their own rules regarding how much value things such as a house or a car can have before they will be taken and liquidated. Filing Chapter 7 is giving yourself a second chance when it comes to your finances.

What Is Chapter 13 Bankruptcy?

Chapter 13 is not about wiping your credit history clean. It is about giving you a grace period to pay off your debt. The court will give you 3 to 5 years to pay off your debts. They will all get frozen during that period. The rates will stop going up and you will stop getting those annoying phone calls. The downside is the fact that this bankruptcy will show up on your record for the next ten years. This means you need to be sure it is what you really understand.

One important thing to note when you are thinking about consulting with a firm such as to file bankruptcy is that you are only going to get help with your unsecured debts. This would not include taxes, trust fund taxes, criminal fines, or child support. These are debts that the court feels as though you should be finding a way to pay regardless of your situation.

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