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Which type of bankruptcy is right for me?

On Behalf of | Jul 10, 2020 | Bankruptcy

Bankruptcy can be a lifesaver for many people who are struggling with unexpected or sudden financial debt. Although Chapter 7 and Chapter 13 bankruptcy can be the key you need to get a clean slate while starting over, which option is best for you?

Bankruptcies are seeing an increase in frequency lately, which means that more people are experiencing financial freedom and taking control of their futures. Knowing how each option can benefit you is the first step in also experiencing financial freedom.

What is the difference between the two?

Chapter 7 bankruptcy is an option that discharges, or eliminates, unsecured debt. Unsecured debt is a form of debt that does not have any collateral tied to it. Examples of this form of debt include medical debt, credit card debt, and debt from utility payments. In exchange for the discharge, the applicant must first sell non-essential possessions like secondary homes or cars, collectibles, or valuable art or jewelry. The proceeds of this sale will pay off any debt the applicant has, and bankruptcy will discharge the remaining balance. This option does not eliminate secured debts, like student loan debts or home loans.

In Chapter 13 bankruptcy, the applicant will still pay off their debt, but this option combines all their debt into a single monthly payment that will fully pay off the debt within three to five years. This option is primarily for applicants who still have a regular source of reliable income to continue to pay off their debt. This option also allows the applicant to lengthen the payment period of non-mortgage payment to fit the Chapter 13 payment period’s length.

Learn more to see what works for you

Speaking with a bankruptcy attorney about your concerns and goals for bankruptcy will help determine which choice is best for you. Bankruptcy is a means of ending sudden or unexpected debt and taking back your future. See what you can do to gain financial freedom today.