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Trying To Decide Your Best Bankruptcy: Chapter 7 Or 13?

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If you have finally made the decision to declare bankruptcy, you may have heard about the different types of "chapters". Derived from the chapters of the federal bankruptcy code, these two main types of bankruptcy filings are usually the most popular for people who are single filers (and not filing for business purposes). These two types of bankruptcy filings are quite different, and both have their advantages and disadvantages. To assist you in determining which type of filing would be best for you, read below to learn a little about each type.

Chapter 13 Bankruptcy

This type of bankruptcy is sometimes referred to as a debt reorganization plan, since it helps filers to pay off some or all of their debts by working with creditors to create lower payments that are spread out over a long amount of time. Chapter 13 is ideal for filers who:

1. Have too much income to file for chapter 7 (see below).

2. Have property that they want to keep and that may be used to generate income. For example, you may be allowed to keep a beach cottage, which could be rented out and the income used to help pay off your creditors.

3. Have plenty of time to complete the process, since chapter 13 can take several years to complete.

4. Want to be left with a more attractive credit record. Both types of bankruptcy stay on your report for the same amount of time, (up to 10 years), but a chapter 13 could make your record look better to potential creditors who see that you have at least attempted to pay off some your debts.

Chapter 7 Bankruptcy

This type of bankruptcy is known as a liquidation filing, since some of your property could be seized and sold to help pay some of your creditors. You should know that you can use exemptions, which reduce the value of your property like your home and vehicle, thus allowing you to possibly keep more property. Chapter 7 bankruptcy is ideal for filers who:

1. Have a moderate to low income level. Each state sets a median income, and filers who exceed that amount may be barred from filing for chapter 7. There are some deductions allowed, so speak with your bankruptcy attorney for more information about specific rules.

2. Have less property to lose. In some cases, you may end up losing some of your property, but this loss must be weighed with potential to have a great deal of your debt burden forgiven.

3. Want to have their bankruptcy completely finished in a matter of a few months.

Speak to a bankruptcy attorney, such as one from Dunbar & Dunbar, for more information.


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