What Is the Difference Between a Chapter 7 and a Chapter 13?
A Chapter 7 bankruptcy will fully discharge (clear) most of your unsecured debt and is intended to give you a fresh start. Unsecured debt is the debt you borrow from a creditor for goods or services on credit in exchange for a promise to pay back the debt. This particular debt comes in the form of medical, credit card and commercial debts as well as personal unsecured loans.
Secured debt is debt that a lender has kept a right to claim the property if the debt is not paid. If you have secured debts, you must determine whether or not to continue to pay down the debt (which is referred to as reaffirmation), pay the market value of the item (usually called redemption) or return the secured item to the creditor.
In a Chapter 13, secured and unsecured debts are paid under a repayment plan. The plan must be completed within 3 to 5 years. Chapter 13 is often used when the debtor has regular income and a secured debt for a house or motor vehicle. The debtor wishes to keep the property but payments are in arrears. Chapter 13 allows the arrearage on the house or motor vehicle to be paid over time under the plan.
Both chapters provide an automatic stay protection. What this means is that a creditor or state court cannot take any further actions on the debt without permission of the Bankruptcy Court. This protection will stop a foreclosure action or vehicle repossession, at least until the creditor obtains permission from the Bankruptcy Court.
Creating a Path to Financial Freedom
Individuals are concerned that a bankruptcy will have a negative effect on getting loans in the future. A bankruptcy could stay on your credit report for 10 years. However, if you are already drowning in debt, a bankruptcy could be the exact strategy that you need to take control of your finances. Whether you need the fresh start of a Chapter 7 or the repayment option of a Chapter 13, a bankruptcy might be the best financial option based on your specific, personal needs. Contact us today at 678-964-7291 or use the form on this page so that we can discuss your options with you.
We will respond quickly and give you the most relevant information and perspective on your case. Please call us at 678-964-7291 for a free consultation or fill out the form on this page.