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Defining Different Types of Bankruptcy

Chapter 7 or Chapter 13? Do you know what this means? Those are two different types of bankruptcies. When you file for bankruptcy you need to know what type is right for you. They work differently, so do not just pick one and think it is over with. The following is some of the basics of both Chapter 7 and Chapter 13 bankruptcy. Just some facts for to help you be more informed.

Chapter 7

  • The final discharge may take four to six months after the initial date of filing.
  • This type of bankruptcy is referred to as liquidation.
  • You are only allowed to file for this bankruptcy once in six years.
  • When you file, you are allowed to give up some of your assets in order to discharge some of your debt.
  • This is a great option for those who have a small amount or no assets, a lot of debt, and little income.
  • When you file for this bankruptcy, it stays on your credit score for 10 years.

Chapter 13

  • Debt limits do apply in this type.
  • This type of bankruptcy is known as debt adjustment.
  • The amount you pay will be determined by your regular income, not how much you owe.
  • Respects the difference between priority debts, unsecured debts, and secured debts.
  • Allows for you to reschedule and extend debts over the entire life of your Chapter 13 plan.
  • You can temporarily halt any foreclosures or collections while you form a plan that helps you repay some or all of your debts during a three to five year period.
  • This will stay on your credit score for seven years.

Correctly Filing is Important

You need to know if you have the correct eligibility required to file for either one of these bankruptcies. That is why you need to become more informed on each type and what they will do for you. Then contact those you are in debt with, and those that can help you with bankruptcy.

Let them know the situation, and together all the relevant parties can work out a plan of action for bankruptcy. You now know how long bankruptcy will be on your credit score, so this is not a decision you want to make quickly. It will affect you for a long time, so make sure you make a well informed choice.

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