Chapter 7 vs Chapter 13 Middletown OH Bankruptcy AttorneyBy now, you’re probably already aware of the benefits of bankruptcy. But which chapter should you file? What are the pros and cons of Chapter 7 vs Chapter 13?

The decision to file bankruptcy is a weighty one. A Middletown OH bankruptcy attorney can help you fully understand your options and determine which chapter best suits your circumstances.

What Is Chapter 7 Bankruptcy?

Chapter 7, often called “liquidation bankruptcy,” is an option that allows you to eliminate some or all of your debt fairly quickly. However, you may have to sell some of your assets to pay creditors in order to do so. After you have paid as much as you can, most of your debt will be discharged.

What Is Chapter 13 Bankruptcy?

Chapter 13, often called “reorganization bankruptcy,” allows you to combine your debts into a three- to five-year payment plan and slowly make manageable payments over time. You typically get to keep your property, and at the end of your payment plan some of your debts may be discharged as well.

What Types of Debt Cannot Be Discharged in Bankruptcy?

Before deciding between Chapter 7 vs Chapter 13, you should carefully assess what type of debts you have. Certain types of debt cannot be eliminated through the bankruptcy discharge, such as:

  • Child support
  • Alimony
  • Most tax debt
  • Student loans

While it may be possible to roll these debts into a Chapter 13 payment plan, you will not be able to clear them through a filing.

When to Choose Chapter 7 Bankruptcy

Chapter 7 may be right for you if you have little or no disposable income. Disposable income is money you have left over after you pay taxes and other necessities. You will have to pass a Means Test to prove that you don’t have the funds to repay your debts. Here are some of the benefits of Chapter 7:

  • Can eliminate some of your debt and reduce total monthly payments.
  • Provides relief from debt collector harassment.
  • Offers a faster method of bankruptcy than does Chapter 13.

It’s important to be aware, however, that you may lose some assets and that your credit score could take a hit. A Chapter 7 will stay on your credit report for up to 10 years from the date you file.

When to Choose Chapter 13 Bankruptcy

If you have a property that you want to keep or an income that allows you to pay some or all of your debts, Chapter 13 may be a good option. Benefits of Chapter 13 include the following:

  • Can stop the foreclosure and debt collections processes.
  • Can help you repay debts and remain in good standing with some creditors.
  • Some of your debts may still be discharged after your payment plan.

You should carefully consider whether you will be able to stick to a payment plan. If you cannot, you may lose your Chapter 13 status and some of your assets to repay creditors. The impact on your credit report is not as severe as Chapter 7 — a Chapter 13 will stay on your credit report for up to seven years.

A Middletown OH Bankruptcy Can Help You Weigh Your Options

Both Chapter 7 and Chapter 13 offer significant benefits, and both can give you a chance at a fresh financial start. But it’s important to fully understand the difference between the two, and weigh the pros and cons of filing Chapter 7 vs Chapter 13. To learn more about which type of bankruptcy is right for you, contact Andrade Law Office LLC today.