Chapter 13 bankruptcy gives you an affordable repayment plan that you can use for the next few years — typically between three and five years — to pay back what you owe. Some of your debt may be forgiven, but the goal is repayment instead of elimination.
Chapter 7, on the other hand, just erases your debt. You do have to liquidate your assets and use the money to pay off some of the debt, but this could be a very small percentage of the total.
As you try to determine which one to use, what you’re probably concerned about most is the impact on your future. People often worry about the hit to their credit score. They do not want to ruin their entire financial future with one bankruptcy filing.
If that is your main concern, you should know that Chapter 13 tends to have a heavy advantage over Chapter 7, not having nearly as dire of an impact on your score. In fact, while Chapter 7 bankruptcy stays on your credit report for an entire decade after you file, Chapter 13 only stays on the report for the next seven years.
This can get you back on your feet faster. Plus, you may be paying into that repayment plan for the next five years. This means that, after you pay off your debt, you really only have the bankruptcy on your record for the next two years.
Do you have more bankruptcy questions to see if Chapter 13 is right for you? It is very important to look into all of your options before you proceed.
Source: FindLaw, “Benefits of Chapter 13,” accessed June 14, 2018