Chapter 7 vs. Chapter 13: Which Should You Choose?

Chapter 7 vs. Chapter 13: Which Should You Choose?

If you find yourself overwhelmed by crushing debts, filing for bankruptcy may be your only viable option. But you have questions and concerns. You want to obtain financial relief, but you don’t want to lose your home to foreclosure. You’d also prefer to keep as many of your assets as possible.

Two main types of consumer bankruptcy exist: Chapter 7 and Chapter 13. Both offer you an automatic stay period during which none of your creditors can contact you by phone, email, snail mail, or any other way in an attempt to get you to pay your overdue bills. When you talk with attorneys in law offices in Rockville Maryland, they can advise you of all the differences between Chapter 7 and Chapter 13. They can also help you decide which type of bankruptcy is best for you.

Chapter 7

Chapter 7 represents the most popular form of bankruptcy, mainly because it is relatively inexpensive and relatively quick, usually requiring only three to four months from start to finish. In addition, Chapter 7 discharges virtually all of your consumer debts, including your credit card debts. If keeping your home is your main concern, however, Chapter 7 probably is not your best choice. Why? Because while you can delay foreclosure via Chapter 7, you likely cannot stop it altogether.

Chapter 13

Chapter 13 represents a debt reorganization procedure. Once you file, your first task is to meet with your creditors and renegotiate your debts. Once these meetings conclude, your next task is to devise a debt repayment plan. Your attorney and/or the bankruptcy trustee can help you with this. The judge will have to approve it before you can put it into place. You then have a lengthy period of time, usually three to five years, to “work your plan,” paying down your renegotiated debts in an orderly monthly manner. By the time your bankruptcy period ends, you have every chance of having reduced your debts, especially your home mortgage, sufficiently so that you can continue paying them on time. You thus avoid foreclosure.

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Earl Barnes