If you are falling behind on making payments and are looking for protection from lurking creditors, chances are you’ve considered Chapter 7 bankruptcy. But you might also want to consider Chapter 13 bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy essentially allows you to wipe your financial slate clean without the worry of making “past due” amounts. A trustee liquidates your salable assets, thus allowing you to pay off your credits. Once that’s done, lenders shouldn’t be calling you to collect.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows you to reorganize your debt. You work with a bankruptcy attorney to set forth a plan to repay as much as your debt as possible during a 3-5 year period. You’ll be required by a bankruptcy court to provide detailed financial statements that support your proclaimed revenue and expenses. Once the plan is created you’ll have to make monthly payments to a trustee, who in turn pays off your creditors. Once you have completed the repayment plan, you are no longer responsible for any previous debts, even if through repayment, you were not required to pay the entire amount that was owed. Chapter 13 also stops increases on interest rates, such as the interest rate owed on a credit card.
Deciding on Chapter 7 or Chapter 13
Choosing between Chapter 13 and Chapter 7 bankruptcy is an important decision to make. Weighing both options with a bankruptcy attorney will help you decide which way to file. Also, to help your attorney help you to make the best decision, it’s necessary you provide them with accurate information regarding your finances. It’s also important to remember that some debt is not able to be discharged under either type of bankruptcy. These debts include: student loans, alimony, and child support.