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The differences between Chapter 7 and Chapter 13

The decision to choose whether to file for Chapter 7 or Chapter 13 bankruptcy can be a difficult one. There are many factors to consider. However, most financial and legal guidance suggests that the line separating the two types of bankruptcy strictly divides along income level and assets.

Generally, filing for Chapter 7 bankruptcy is a simpler, more straightforward process. For this reason, according to recent data, approximately 71 percent of all bankruptcy cases are Chapter 7. Chapter 13, conversely, is a longer process with somewhat confusing rules. Other differences can include:

  • Chapter 7 focuses on debt elimination while Chapter 13 is considered debt reorganization and repayment.
  • In Chapter 7, you might face the foreclosure of your property or repossession of your vehicle. In Chapter 13, you will likely keep your assets if you stay current with the court-ordered payments.
  • The duration of a Chapter 7 bankruptcy is considerably shorter than the 3- to 5-year repayment plan in a Chapter 13.
  • In the future, you can file a Chapter 7 bankruptcy eight years after the last Chapter 7 filing. You must wait two years from the successful completion of a Chapter 13 to file again.

These are the differences in the broadest strokes. You should discuss your financial future with a knowledgeable legal professional. A bankruptcy attorney can thoroughly examine your situation and provide guidance uniquely tailored to your challenges and your future goals. Don’t hesitate to explore your options for a fresh financial start. Making a decision early can prevent additional complications.

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