Memphis residents who are thinking about filing for bankruptcy have several key decisions to make. However, the biggest decision may be whether to file for Chapter 7 or Chapter 13 protection. Let’s take a look at the key differences between these two options and how to decide which one may best meet your needs.
What to know about Chapter 7 bankruptcy
Chapter 7 bankruptcy is often referred to as a liquidation bankruptcy because assets are often sold to raise money to pay off creditors. However, it’s worth noting that the equity in a home or car is generally exempt from liquidation. If you don’t own any non-exempt items, it may be possible to have your debts discharged without paying anything to your creditors.
Generally speaking, it only takes a few weeks to receive a discharge in such a proceeding. A liquidation bankruptcy may be ideal for those who own few assets or who have mostly unsecured debts like credit card balances or unpaid medical bills.
What to know about Chapter 13 bankruptcy
Chapter 13 bankruptcy is typically referred to as a reorganization bankruptcy. This is because you spend three to five years repaying creditors as part of a plan approved by your creditors and the bankruptcy court. During the repayment period, you can keep a home, car or other secured assets assuming that you stay current on the loan. A reorganization bankruptcy is ideal for those who are looking to retain property or who make too much to qualify for Chapter 7 protection.
If you are struggling to repay your debts, it may be in your best interest to consider bankruptcy. After filing, you will likely receive a stay of creditor collection activities, which may make it easier to overcome your existing financial emergency.