Chapter 7 vs Chapter 13 Personal Bankruptcy Options, pros/cons for each

There are two types of bankruptcy for an individual considering this option. They are referred to as Chapter 7 and Chapter 13. Let's take a quick look at the basics for each. If either applies, then a follow up call or conference with a bankruptcy attorney is the next step.

Chapter 7 Bankruptcy

This is the part of the bankruptcy statute that's designed to eliminate debt and wipe out old bills. If an individual has more credit card debt, personal loans, payday loans and other unsecured debt that is too much for them to continue to make payments on or too large amounts to ever get repaid, then Chapter 7 is the answer.

The purpose of Chapter 7 is to eliminate old debt completely and to get a fresh start. As a result, when the bankruptcy is completed.. referred to as "discharged" all the debt covered in the bankruptcy will have been wiped out. To see if you qualify for Chapter 7 or to confirm if it works for you, a conference with a bankruptcy attorney will answer all the important questions.

Chapter 13 Bankruptcy

Chapter 13 is for those persons who have an ongoing, steady income and in a position to repay their debts if they are given enough time, along with a lower interest rate and not kept in a position where they are continually incurring additional penalties due to late or skipped payments. Chapter 13 allows the individual to rework their debt with their creditors in an agreement, called a plan, enforced by the Bankruptcy Court. The individual's debt gets reworked so that at the end of the process the debts are considered fully paid. This chapter is often referred to as "debtors bankruptcy".

Those individuals choosing Chapter 13 often have a home. They may also have other significant property that they want to protect and hold onto. This chapter allows the person to keep their assets while working through a repayment plan with their creditors.

A bankruptcy attorney can work with you to determine if Chapter 7 or Chapter 13 is the right one for you depending on your circumstances. During this process, the bankruptcy attorney can help the debtor keep harassing creditors in line and assist in stopping a creditor from removing an asset from your procession that's in question.

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Bankruptcy laws, as well as the rights of both debtors and creditors, do vary from state to state. It's important to use a bankruptcy attorney who is located in the state where you live so they can be familiar with the particular statutes that are applicable.