Facing financial issues is tough. Oftentimes, individuals and families in New York can budget their way through money problems. While this may be the case for some, many seek alternative ways to address their debt problems. Although filing for bankruptcy is a major step, it is one to not be fearful of. In fact, it may be the best route for one to obtain a fresh financial start. Thus, it is important that one considers what options they have and whether filing for a Chapter 7 bankruptcy or a Chapter 13 bankruptcy is in their best interests.
Filing for a Chapter 7bankruptcy
When an individual decides to file for bankruptcy, he or she is most likely to file a Chapter 7 or Chapter 13 bankruptcy. Thus, in order to understand why one would decide to file for a Chapter 7 over a Chapter 13, it is important to note the key differences, setbacks and benefits of each of them.
A Chapter 7 bankruptcy is also referred to as a liquidation bankruptcy. In other words, it helps discharge debts, including most unsecured debts, which includes medical bills, personal loans, payday loans and credit card debts. These debts are eliminated without the debtor having to make any additional payments to their creditors. However, in order to move forward with it, one will need to sell off certain assets. The loss of a home or a vehicle may occur, but it does not always occur. Another downside is that it will remain on one’s credit report for up to 10 years. This could result in a lower credit score, making it harder to purchase a home or person al vehicle without having a higher interest rate.
Comparing to a Chapter 13 filing
A Chapter 13 bankruptcy is known as a reorganization filing. This is because it reorganizes one’s debts into a repayment plan. This will include secured debts, such as a mortgage or car payment, and it will eliminate one’s unsecured debts. This type of bankruptcy is for those making a certain level of income, allowing them to pay back some of their debt, even if it is not at the original terms.
Navigating a bankruptcy filing can be overwhelming and confusing; however, one does not need to do it alone. Once the decision is made to file, any questions or concerns can be addressed, ensuring the filer knows what to expect and how bet to move forward with their life after bankruptcy.