Chapter 7 vs. Chapter 13: Which Is Better?

Filing for bankruptcy is one of the hardest decisions that anyone may be forced to make. Depending on the financial situation, your debt, and the status of the economy, bankruptcy can be your only option to live an everyday life again. Your life will change, and your credit will take a considerable hit after going public with your insolvency. However, bankruptcy will not stick to your credit history forever. You have the choice between chapter 7 and chapter 13 for bankruptcy, and both of them have their advantages. Read on to learn more about these types to know which one will work best for you and your financial situation.

What is Chapter 13?

Chapter 13 is one of the insolvency models you can file for; by going public, you can’t keep up with your debt payments anymore. This chapter is a less drastic option to get help from trustees and attorneys to restructure your financial situation. They will help you figure out a more straightforward plan to pay off a portion of what you owe because the debt won’t be fully exempted. Reorganizing your debt will give you the chance to pay off that small portion within three to five years. You will be forgiven for being unable to keep up with the original plan, and your creditors will still be on good terms with you. The key is to prove that you have enough monthly income to meet the new repayment plan requirements to ensure that the process goes smoothly.

What is Chapter 7?

Chapter 7 is another type of insolvency that anyone can file for if they can live with the outcomes. This chapter is about liquidating your assets to come up with the money for paying the rest of your debt that you can’t afford. Chapter 7 starts with repaying the unsecured priority debt first, then the secured debt. Bankruptcy cases are quite common in most states, including North Carolina, where creditors are convinced to forgive a significant portion of a person’s debt. The bankruptcy attorneys at SasserBankruptcy.com suggest that Chapter 7 is a faster option to get some relief from creditors, and starting fresh can help rebuild credit. Consider filing for this chapter if you believe you’re capable of coming up with assets that can be liquidated to cover the debt you owe. The law protects individuals by not including specific belongings or support in the liquidation process. Selling your car, house, or using retirement accounts will not be an option.  

They are Both Good Options

Figuring out which one is better depends on the individual’s situation because they are both excellent options. The reasons for filing for bankruptcy vary, and those reasons will be the deciding factor on which chapter will suit you and your financial state. Instead of thinking about which one is better, you should think about the possible changes in your life after going public with your insolvency. People should think about their state of employment, their credit score, the debt status, and their ability to pay off what they can to start saving again. Whether you go for Chapter 7 or Chapter 13, the most important fact is that these lifelines are your ticket to a better and more comfortable life. Come up with a plan with your trustees and attorneys to pay off what you’re capable of and start working on improving your credit score until the bankruptcy is off your credit history.

Some of the Debt that Will Stay Outstanding

Not all of your debt will be exempted because none of these chapters will stop them from being outstanding. However, when you’re relieved from the rest of your debt, you can afford to pay off taxes, student loans, alimony, or child support. Either of these chapters will wipe out any burden of debt that you can’t pay off.

Insolvency shouldn’t be viewed as the end of your life because it’s an effective method that helps you live your life again. Being in massive debt and the stress of not having the ability to pay it off can make anyone’s days miserable, and that’s no way to live. Think of it as a lifeline that starts a new phase in your life, getting the chance to get your financial situation in order. The system has several ways to help people in debt. When it reaches the point where you don’t have enough money to pay for necessities, bankruptcy is your only viable option. Consider going for either of these chapters if they suit your needs and financial situation.