Chapter 7 bankruptcy is quite different from Chapter 13 bankruptcy. Both can be used to create a more positive financial future, but they do so in very different ways.
With Chapter 7, repayment of some of the debt is necessary. This is why non-exempt assets have to be sold to pay creditors. Filers are allowed to keep exempt assets, however, so they don’t have to sell everything they own. After liquidation, the remaining debts are forgiven.
With Chapter 13, on the other hand, debt is simply placed into a repayment plan. This can be used to consolidate multiple debts into one affordable monthly payment. People do not have to liquidate assets, but they do have to make those monthly payments for the next 3-5 years.
Do you have a stable income?
Often, the biggest question regarding which type of bankruptcy a person will qualify for is whether or not they have a stable income. If they do not, then a repayment plan would not make sense. Chapter 7 would be best because they may own assets that can be sold, even if they do not have money coming in on a consistent basis.
On the other hand, if someone does have a stable income, then they may just need to spread their debt out to make it affordable. This can be accomplished through Chapter 13.
When determining which type of bankruptcy is right for you and which one you qualify for, be sure you know exactly what legal steps to take. It can help to have an experienced law firm on your side at this time.