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At Capshaw & Associates, we help with bankruptcy litigation. It is important that anyone considering bankruptcy understands that it is not a “one size fits all” process. While often portrayed as a last resort that will leave you financially destroyed, there are many different kinds of bankruptcy, some of which are much better options than staying in deep debt.

Bankruptcy is a legal way to eliminate or lessen debt when someone is consistently unable to make their required repayments. There are many different forms of bankruptcy, but the most common by far are Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. They vary in what the individual risks if they get approved, how long the process takes, and who is eligible to do it. Here’s our breakdown of the key differences:

Chapter 7 Bankruptcy

Chapter 7 Bankruptcy completely erases your debt when you are approved for it. Your creditors stop collecting debts as soon as you file for it. The entire process takes three to five months to complete. After that, you can start your life without those crippling debts being held against you.

The downside to Chapter 7 Bankruptcy is that your physical property is seized and used to repay your debts. Some property is able to be protected ahead of time and considered exempt from the process. In general, however, Chapter 7 Bankruptcy may be better for someone who doesn’t own their home or business and has few physical assets. You also have to be below a specific income level in order to apply for Chapter 7 Bankruptcy. Not everyone can do it.

Chapter 13 Bankruptcy

Chapter 13 Bankruptcy consolidates your debts into a repayment plan that is considered realistic for you to pay off. The payment plan typically lasts for three to five years on a monthly basis. For this reason, Chapter 13 Bankruptcy is intended for someone with regular income who has enough left over to afford some payments. Your many debt payments will be reduced to one single, smaller monthly payment. At the end of the repayment period, your debt will be erased.

The upside of Chapter 13 Bankruptcy is that you are able to keep your physical property. If you have a home, business, or vehicle that you love, Chapter 13 Bankruptcy may be a better option than Chapter 7 Bankruptcy. The downside is that it takes much longer to complete, and you have to make regular payments along the way. Chapter 7 Bankruptcy erases your debt by taking what’s yours, Chapter 13 Bankruptcy reduces your debt by creating a plan to pay it off.

Which is Right For You?

Both Chapter 7 and Chapter 13 Bankruptcy are not decisions to be taken lightly. They can help provide debt relief, but they are involved and consequential processes. For help determining what option is right for you, contact Capshaw & Associates today! We are a civil trial law firm here to help you when you need it most.