The Difference Between Chapter 7 And Chapter 13 Bankruptcy
Declaring bankruptcy can be confusing. There are two different types of bankruptcy, Chapter 7 and Chapter 13. While there are many complex differences between the two, there are only several you need to know about to decide which is best for you. A good bankruptcy lawyer dallas will be able to navigate the complex regulations and filing requirement of each, it is not something you want to attempt on your own.
Chapter 7 bankruptcy is for individuals and some businesses, such as sole-proprietors. With the Chapter 7 filing, you can have all of your unsecured debt discharged. The most common forms of unsecured debt are medical bills and credit card bills. These are debts that were acquired without you having to put up collateral or have another person guarantee your ability to pay them back. Chapter 7 filings will discharge the debt off your credit record in as little as three to six months. There is a low income requirement that has to be met to be eligible for Chapter 7 filing.
Chapter 13 is for individuals only. The Chapter 13 bankruptcy is designed with those with an income that exceeds the allowances for Chapter 7. With Chapter 13, you will enter into a payment plan with a trustee. The payments are stretched over a period of 3 to 5 years and pay down the debt to an agreed upon discharge amount. Some debt may be automatically discharged, such as smaller unsecured debts.
A Chapter 7 bankruptcy filing will remain on your credit report for 10 years. A Chapter 13 filing will remain on your credit report for 7 years. These are approximate time frames and are dependent on several other factors. A bankruptcy on your credit rating can seriously impact your ability to be hired, approved for housing or to gain new credit. It can also limit your ability to get or cosign for loans.
Think through your options carefully before filing for bankruptcy. While it may appear to be an easy way to start over again, there are significant advantages and disadvantages to filing. Choosing between the two forms of bankruptcy can also change how it affects your future. Your best bet is to look more closely at the differences between a Chapter 7 and Chapter 13 filing before making a decision either way. Talking over your options with a bankruptcy attorney or credit counselor may be your best approach.