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Three Key Differences Between Chapter 7 And Chapter 13

Filing for bankruptcy is an option many distressed consumer debtors turn to when they are having a hard time paying all of their bills. But there are a lot of choices to make, once the choice to file is initially made, and knowing a bit about how the process works is helpful. Some of the decisions you have to make after you decide to file bankruptcy include when to file, how to react when lenders call for payment, and what type of case you should file. There are two types of cases, a Chapter 7 and a Chapter 13, and most people prefer to file a Chapter 7. However, the choice of chapter is not entirely up to you, so you need to understand how each chapter of bankruptcy works so you will know what to expect in your case.

Three key differences between a Chapter 7 bankruptcy case and a Chapter 13 bankruptcy case are:

• In a Chapter 7 case you are allowed to get rid of all of your unsecured debt, but in a Chapter 13 case you are required to pay back a percentage of that debt. Unsecured debt includes things like credit cards and medical bills.
• In a Chapter 7 case you will most likely have to pay the full balance on your car if you want to keep it, but in a Chapter 13 you only have to pay the vehicle’s value. You are also permitted to pay a lower interest rate on your auto loan in a Chapter 13, but in a Chapter 7 you will be asked to pay the contract rate in most instances. This difference in repayment for cars can save thousands in a Chapter 13, versus what is repaid in a Chapter 7.
• A Chapter 7 usually only takes a few months, while a Chapter 13 can last up to five 7ears. This is because in a Chapter 13 you come up with a plan of repayment, and make a plan payment to cover the majority of your debts. In this way a Chapter 13 is similar to reorganization or consolidation of debt.

As you can see, both chapter of bankruptcy offer financial relief and benefits. For a determination of what type of case you qualify to file, call our office for an in-depth analysis of your specific financial situation.

For more information about how to handle overwhelming debt, contact us at We will help by coming up with solutions that work for you.

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