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Which Chapter of Bankruptcy Should I Select?

You may be on track for filing for bankruptcy. You know you are ready for a new start and to repay your debts, but you may not know what chapter to select during the process. It’s critical to choose the correct chapter in order to reap the most benefits for your situation.

There are two main chapters for individuals: chapter 7 and chapter 13. Both chapters have similarities with significant differences.

Chapter 7

This is the most common chapter because it’s often perceived as a “fresh start” for filers. It brings relief for individuals, married couples and businesses to eliminate overwhelming debt. Like chapter 13, chapter 7 halts any creditor harassment and allows you to discharge any unsecured debts – any loans that are not backed by collateral. It’s also beneficial for stopping repossession, delaying foreclosure and stopping wage garnishment.

Chapter 13

Chapter 13 has many similar benefits to chapter 7. However, there are some extensions to the protections and plans that come with chapter 13. For example, chapter 13 allows participants to keep their homes and other assets while maintaining their income. Chapter 13 requires you to take on a repayment plan that involves paying off nonsecured debts over three or five years. It does affect your credit score for several years afterward, but the benefits outlive the costs.

Depending on your specific situation, one chapter will work better than the other. It will rely on factors like your debt, your assets, your current income and what assets you want to maintain. If you want to know the full extent of both options, you will need to consult with a bankruptcy attorney or research more into what each chapter entails. It may be the beginning of a new financial future.