When you initially decide to pursue filing for bankruptcy, you will encounter information about the two main branches consumers use when they need debt-relief help. Of the two options, Chapter 7 is often a better choice than Chapter 13, and here are three reasons why this might be true in your situation.
It Offers Debt Forgiveness
As you compare the two options, you will see that Chapter 7 offers forgiveness of debt, while Chapter 13 requires you to repay your debt. If you do not earn more money than the median income in your state, you will be eligible to file for Chapter 7. With this, you will receive debt forgiveness for any debts that qualify. An example of a qualifying debt is a credit card account you owe money on. Through Chapter 7, you would no longer owe the balance on this card. Another type of qualifying debt is medical bills. If you want a truly fresh start, Chapter 7 will offer this more so than Chapter 13.
It Is Faster
Chapter 7 is also a lot faster to work through than Chapter 13, and this is primarily because Chapter 7 does not require the three- to five-year repayment plan. Chapter 7 takes some time, but it does not take nearly as long as using a Chapter 13 repayment plan. In fact, as soon as you file for Chapter 7, the court will notify every creditor listed on your paperwork. Once this occurs, you can stop making your payments, and your creditors will not be able to contact you or send you letters about your accounts. You will have instant relief from your creditors, and you will have more cash in your pocket because you will not have to pay these bills.
It Is Best for People Who Primarily Owe Money for Unsecured Debts
Chapter 7 is not good for people who owe money on debts that do not qualify or for people who are facing foreclosure, but it is good for people who owe money primarily on unsecured debts that qualify for forgiveness. Because of this, you will need to find out if your debts qualify before you decide to use Chapter 7 as a way to obtain a fresh financial start.
If you need help with the debt you have, contact a bankruptcy lawyer. When you meet with him or her, you can learn more about the differences in these chapters of bankruptcy and alternative options for debt relief.