How Chapter 13 Bankruptcy Varies from Other Types of Personal Bankruptcy Filings

by | Mar 24, 2017 | Law Services

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People who are dealing with personal finances that have grown out of control may often consider filing for bankruptcy. While it’s not a decision that should be the first option, as most professionals would agree that bankruptcy is the last resort, there are also several types of bankruptcies a person can file for. In general, the two types of bankruptcies that are most beneficial for personal finances are chapter 7 and chapter 13 bankruptcy.

The first thing to understand is that when an individual or couple meets with a bankruptcy attorney, the attorney will typically provide the individual or couple with the means test. This test is required by law. The results of this test will help determine what type of bankruptcy they qualify for.

In most instances, Chapter 7 bankruptcy is what people qualify for. This type of bankruptcy helps to wipe out a great deal of personal debt legally and helps a person start fresh with finances and credit. Chapter 13 is typically reserved for higher income earners. Rather than the courts wiping out a lot of personal debt, Chapter 13 creates a court mandated repayment plan of 3 to 5 years. In some cases, the courts can reduce the amount of debt a person repays, but the repayment plan is ordered by the courts. A court-appointed trustee is also appointed to handle those payments and disseminate the money to various creditors.

Once the payment plan has been completed, the bankruptcy is discharged and a person can try to rebuild their credit. However, it is important to note that as far as a person’s credit score, filing for bankruptcy is still going to have a negative impact. Though, creditors are more likely to take a chance on someone who filed for chapter 13 bankruptcy than they would for somebody who filed for Chapter 7.

In any instance, if you’re facing financial difficulties and your thinking about filing for bankruptcy, you may want to speak with the attorneys at website. They can help you to better understand if Chapter 7 or chapter 13 is the right type of bankruptcy for you, and they can help you proceed through the bankruptcy process.

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