Some financial decisions can have disgraceful consequences. If you have too much debt and cannot find a way to repay your creditors, you have to consider available debt-relief options. Bankruptcy should not be an immediate choice, but it may offer immediate relief depending on your circumstances. Talk to an experienced Charleston, WV bankruptcy attorney to understand the various chapters of bankruptcy. In this post, we are sharing significant aspects of Chapter 13 and Chapter 7.
Basics of Chapter 7
Chapter 7 bankruptcy allows you to liquidate your assets so that you can repay your creditors. Compared to Chapter 13, the process doesn’t take as much time, and you can be debt-free in as little as six months. Chapter 7 is also cheaper than Chapter 13. You may potentially retain your home if you can repay the instalments and prevent your creditors from taking further legal action against you. Chapter 7 bankruptcy puts an automatic stay, and afterwards, you can start afresh and plan your finances.
On the flip side, not everyone can file for Chapter 7. Your income is an important factor, and your bankruptcy attorney can do a “means test” to check your assets, debts, and other expenses. Also, you cannot discharge all your debts. Some debts, such as unpaid federal & state taxes and student loans, cannot be discharged.
Basics of Chapter 13
Chapter 13 is more of a repayment plan, where you get three to five years to repay your creditors. This is an ideal choice for people who lack time and do not have a stable source of income. You can also retain most of your assets and prevent foreclosure. Chapter 13 doesn’t take away everything you own, which is a big advantage.
In terms of cons, Chapter 13 will still impact your credit score, and you cannot discharge all assets. You will need to pay for student loans, unpaid taxes, child support, and alimony (if and as applicable). Chapter 13 also costs a tad more than Chapter 7.
What is better – Chapter 13 or Chapter 7?
One type of bankruptcy is not better than the other. It all comes to a person’s financial situation. Chapter 13 offers the relief they need for some people because they can still discharge unsecured loans without losing their assets. Chapter 7 is more common and an ideal option for people who don’t have many assets or stable income.
Talk to an attorney to know more about both options in depth.