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What are the differences between Chapter 7 and Chapter 13 bankruptcy?

 by Greg Cryns

What are the differences between Chapter 7 and Chapter 13 bankruptcy?

You've reached the end of your battle and you see you are losing. You can choose to file bankruptcy. For that you will need an attorney but you should read up a bit on the two 

primary ways to claim bankruptcy: Chapter 7 and Chapter 13.

Most people in your situation choose Chapter 7 bankruptcy. Here your assets are liquidated except for your home or car. The proceeds are used to pay off your creditors.

The rules about your eligibility for Chapter 7 changed in October 2005. Your income must be below a specified limit and your assets must be lower than needed to pay for 25% of your debts.

Chapter 13 bankruptcy was also changed recently. Previously, the court would decide a monthly payment needed to cover your debts. Now the government mandates that you must attend credit counseling before you can be considered for Chapter 13. People used to hide assets in real estate property and other places. Now the government controls what you can keep and what must be liquidated.

Don't underestimate the effect of bankruptcy in your life. Choose another option if at all possible.

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