Chapter 7 versus Chapter 13: Which Bankruptcy is Right For You?
The good news is that the number of US bankruptcies has decreased over the past few years. In 2019, nonbusiness bankruptcies fell to 750,489, as compared to 756,722 in 2018 and 770,901 in 2017. The bad news, however, is that the 2019 figure still represents over three-quarters of a million Americans who found it necessary to file bankruptcy.
If you, too, find yourself unable to keep up with your bills because you underwent a medical emergency or got laid off during the current pandemic, bankruptcy may be your only option. However, when you need a law office in Hattiesburg MS to help you, be sure to find one whose attorneys are well-versed in the various types of bankruptcy and know which works best for each situation.
Chapter 7 Overview
Chapter 7 remains the most popular type of personal bankruptcy. In 2019, almost twice as many individuals filed Chapter 7 as filed Chapter 13. The reasons for Chapter 7’s popularity are many, including the fact that it’s the simplest type of bankruptcy and also takes the least amount of time, usually around six months. In addition, Chapter 7 is a discharge proceeding, meaning that the bankruptcy court dismisses your credit card debts and nearly all the rest of your consumer debt. Consequently, you no longer have the obligation to pay these debts.
On the other hand, if you’re a homeowner facing foreclosure, Chapter 7 likely is not your wisest choice. Why? Because while a Chapter 7 can forestall a foreclosure, it seldom, if ever, prevents one.
Chapter 13 Overview
Chapter 13 represents a reorganization procedure rather than a discharge procedure. Here, you have the opportunity to meet with your secured creditors, of which your mortgage holder is one, and renegotiate your debts. These negotiations likely will result in you receiving more favorable interest rates and possibly even decreased remaining balances.
Next, you devise a written repayment plan. Once the court approves it, you then have a lengthy period of time, generally three to five years, to make your debt payments as called for in your plan. This substantially pays down your debts, if not pays them off completely. At the end of your bankruptcy period, the court discharges all your unsecured debts and those not mentioned in your plan.