What’s the difference between Chapter 7 and Chapter 13 in Bankruptcy?

Deciding to file for bankruptcy is not something anyone takes lightly. It can be a complicated process, as well as life-changing. Therefore, it’s critical to understand which type of filing is the best option for your situation.

The different bankruptcy filing codes outline how your debt processes. Each has specifications regarding whether the settlement is through any property you own or a repayment plan. Take a look at the particulars for each.

Chapter 7

  • Requires you to sell some or all of your property to pay off debt. What property you must sell depends on federal exemptions determined by the state where you live.
  • It’s for use by both individuals and businesses
  • Limits on disposable income
  • Debtors can discharge most of their debts, allowing them to get a fresh start financially.
  • Typically takes three to five months to discharge

Chapter 13

  • You can keep your property while following a repayment plan mandated by the bankruptcy court
  • It’s for use by individuals only
  • Limits on unsecured and secured debt
  • Debtors can keep their property while paying off their debt
  • Typically takes three to five years to discharge

Filing for bankruptcy might seem like the last resort, as it can have severe implications for your credit. However, most people who are at the point of considering bankruptcy probably have taken a hit to their credit score already. To find out if your credit and bankruptcy status impact your ability to purchase a home, contact Midland Mortgage Corporation for the professional guidance you need at any stage of your home buying process.

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