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Navigating Basic Differences between Chapter 7 and Chapter 13 Bankruptcy

chapter-7-13-bankruptcy.jpgNot all bankruptcy cases are the same. There are several factors involved when beginning the process. An attorney will evaluate information including your personal income, assets, ownership of property, and debt obligations. Based on your individual situation, there will be a recommendation and plan for how to proceed.

Most individuals fall into the category of Chapter 7 or Chapter 13 bankruptcy filing. It is important to learn about each option, how they compare, and how each are applicable to you. Topics to compare include:

  • Effect on assets;
  • Payment time;
  • Effect on credit; and
  • Results at the end of bankruptcy.

The most common type of bankruptcy for individuals is Chapter 7 and is designed to alleviate most debts by selling assets to pay to creditors. There are qualifications involved for this type of filing and it cannot repeated for six years. Record of this type of bankruptcy may remain on a credit report for up to 10 years.

Chapter 13 bankruptcy is a repayment option for debt relief over a period of time of typically three to five years for those who earn regular income. This filing also remains on a credit report for at least seven and up to 10 years. Creditors may assess more value over this type of bankruptcy because completion of the plan may pay off more debts than under a Chapter 7 filing.

When it comes to concerns about building credit after filing bankruptcy, U.S. News & World Report published an article discussing common bankruptcy myths. People often worry that bankruptcy ruins your credit permanently, but there are options, such as secured credit cards, to begin a rebuilding good credit by making consistent payments on time.

Bankruptcy is an option to help you strategize a new start when it comes to relief from debt. Each situation is different and requires personalized attention to ensure the right plan is chosen based on how the outcome will affect your future credit and finances.

Our firm is here to help you through the process and answer the questions that may arise. If you are considering filing for bankruptcy in California, contact a San Jose bankruptcy law attorney today to discuss your legal options.

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