Bankruptcy is often a helpful solution for people who are buried under the burden of massive financial debt. While these options have the potential to free people from this debt, you need to be sure you choose the correct bankruptcy option for you. Knowing the differences between the two most common forms of personal bankruptcy, Chapter 7 and Chapter 13, can be a major benefit.
While each type of bankruptcy impacts your future, it also affects your credit report. It is important to understand the differences in the options you have, so you can better prepare for tomorrow. You should also know that neither of these options will discharge alimony, child support or various taxes.
What to know about Chapter 7 bankruptcy
Chapter 7 bankruptcy is a fast method of clearing most of your debt without a repayment. There are ways to still retain your house, car and other personal property and still eliminate most of your debt. This debt includes, but is not limited to, credit card debt, medical bills, personal loans, and pay-day loans. This method of bankruptcy is often completed in less than 90 days.
What to know about Chapter 13 bankruptcy
Chapter 13 allows people to still discharge some of their debt even though they may have a higher income or have unexempt assets. It also allows a person to retain their homes should they be behind on their mortgage payments. A plan is developed that consists of monthly payments to repay certain debts over a three to five year period of time. The plan only pays the debt you have to pay and can be set at a reasonable monthly amount.
Consider your options before committing
When you are considering what option is best for your future, make sure you have all the facts first. Take some time and talk with an attorney for more help in bankruptcy options.