Debt is a serious issue for many people. People who have overwhelming amounts of debt often struggle to make consistent payments. As a result, debtors can face late fees and high interest rates that make it harder to pay down their debts.
Bankruptcy is a solution to overwhelming debt. Once a debtor files for bankruptcy, they can be given immediate relief. Bankruptcy can discharge most forms of debt, including credit card debt, medical bills, personal loans and utility bills. Chapter 7 and Chapter 13 bankruptcy are two of the most common forms of debt relief for individuals.
Debtors who file for bankruptcy should learn about the difference between Chapter 7 and Chapter 13 bankruptcy. Here is what you should know:
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy offers instant debt relief for low-income individuals, discharging debts four to six months after a filing. Once a debtor successfully files for Chapter 7 bankruptcy, the filing will last on a debtor’s credit report for 10 years.
This form of bankruptcy is also referred to as “liquidation bankruptcy.” In a very few cases, some of a debtor’s assets will be liquidated to discharge debts. However, these debts typically include nonexempt assets, including a second home or second vehicle.
What is Chapter 13 bankruptcy?
Chapter 13 bankruptcy offers individuals with disposable income an opportunity to pay off their debts in three to five years. Once a debtor successfully files for Chapter 13 bankruptcy, their debts are reorganized into a payment plan. This form of bankruptcy lasts on a credit report for about seven years.
Individuals can learn more about Chapter 7 and Chapter 13 bankruptcy by reaching out for professional legal guidance.