Filing for bankruptcy protection can be quite confusing, mostly because of the different types of bankruptcy available to you. Two reasons to consider filing for a chapter 7 instead of a chapter 13 bankruptcy are that it allows you to start over financially and it is a faster process.
Start Over Financially
The biggest reason to file for a chapter 7 bankruptcy is that it will allow you to get rid of the majority of your debts and start over. In most cases, you will need to continue paying for certain debts, such as IRS debts, alimony/child support, and student loans. You will be able to wipe out debts that will include car loans, home loans, credit cards, medical bills, and payday loans.
The only real downside to wiping out all of these debts is that you will likely end up having to surrender some of your property. If you decide that you want to have a car or home loan discharged, then you will need to return the vehicle or home.
In addition, any money that you have in your bank account when the bankruptcy process begins will be taken by the bankruptcy court in order to help repay your creditors. However, anything you earn after the filing date will be yours to keep.
Now, the reason that a chapter 7 is a better fit for many people than a chapter 13 is that a chapter 13 is going to require that you pay back a portion of your debts. This is because in a chapter 13 bankruptcy the court will arrange for a payment plan that will reduce the overall amount of debt you owe and require that you make payments for several years. This can be difficult if you have a limited income or have lost your job.
The process for completing a chapter 7 bankruptcy is going to be much shorter than a chapter 13. In most cases, your debts in a chapter 7 bankruptcy will be discharged and the process will be complete in a few months. The chapter 7 bankruptcy process will typically not last longer than three months unless the bankruptcy trustee and court decide that you have been hiding assets.
A chapter 13 bankruptcy will require that you complete your payment plan before your debts are discharged. The problem with this is that the payment plan is typically set up for 3–5 years. Another issue is that if you do not complete the payment plan then your debts will not be discharged.
Speak to a bankruptcy attorney from a firm like FactorLaw today in order to determine which type of bankruptcy is right for you. A chapter 7 bankruptcy will allow you to get a fresh start with your finances in a short amount of time