Everyone’s financial situation is different, which means that every bankruptcy case is different. With such variability in financial troubles, no two people will face the same benefits or risks associated with a particular type of bankruptcy. Therefore, there are a few things to consider before deciding which type of bankruptcy is best for you.
Chapter 7 bankruptcies are commonly sought after due to their ability to erase debts without requiring much payment on your part. However, there are strict qualification standards for Chapter 7, which often weed out many people from eligibility. Chapter 7 is reserved for those who cannot afford to repay their debts, even over a period of several years. Although Chapter 7 may provide the benefit of having your debts erased within a matter of months, you also are at a greater risk of having certain assets liquidated by creditors. The reason is that the court must find a way to satisfy your debts with certain creditors. Secured debts are at the greatest risk of being seized in efforts to resolve your debts.
Although not primarily thought to be as beneficial as Chapter 7, Chapter 13 bankruptcy allows for your debts to be repaid over a three to five year period. Your bankruptcy case will last significantly longer in Chapter 13, but you will have the benefit of satisfying your debt payments without risking your assets in liquidation. Once your debts have been repaid through the Chapter 13 plan, you will own your assets and your credit will have been affected far less than a Chapter 7 case.