Chapter 7 and Chapter 13 bankruptcy both offer a viable path out of unmanageable debt and the opportunity to build a stronger, more secure financial future. Both achieve these goals in many different ways. Before filing, you should understand their differences in order to find the most appropriate solution for your particular situation. Below are some of the key differences between these two common types of consumer bankruptcy.

Chapter 7

Chapter 7 bankruptcy eliminates most kinds of unsecured debt, including credit card balances, medical bills, and past-due utility charges. In Chapter 7, debtors with a delinquent car loan or mortgage may need to return the property to the lender or allow it to be sold in order to offset some of the outstanding debt. The entire process of discharging debts typically takes just a few months. In cases with more complex assets or with creditors who object to the bankruptcy filing, the process can be longer. Bear in mind that there are some types of unsecured debt that are non-dischargeable through Chapter 7, including student loans, alimony, and child support. Chapter 7 is ideal for filers with little or no income.

Chapter 13

Chapter 13 bankruptcy is not debt elimination, but a debt repayment program. The courts restructure your existing debt into a long-term payment plan in which you repay what you owe. This usually occurs over the course of three to five years. The debtor can keep property like a car or a home as long as they are able to pay off both the current amounts owed and the back-amounts included in the repayment plan. Filing for Chapter 13 bankruptcy is a better option for those who have a higher income and enough money each month to dedicate to a payment program.

To further explore Chapter 7 and Chapter 13 bankruptcy, consult an attorney. Bankruptcy lawyer William C. Rieth has more than 25 years of experience representing clients throughout the Monroe County, NY, area. He is committed to helping you get your financial life back on track through bankruptcy representation and comprehensive debt relief solutions. Call (585) 232-6520 or visit him online to schedule a free initial consultation.