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A Brief Overview of Chapter 7 and 13 Bankruptcy

Posted on in Bankruptcy

If you're nearing financial insolvency, one of the most difficult decisions with which you'll be faced is whether or not you're going to file bankruptcy. Despite the social stigma attached to it, there are many boons to declaring bankruptcy that could help you and your family get back on its feet. In fact, according to the National Consumer Law Center, “bankruptcy can stop foreclosure on a house or mobile home, prevent repossession of a car or other property, stop wage garnishment or debt collection harassment, and prevent termination of utility services.” These could all be beneficial, especially if you have young children. In 2005, however, a national overhaul of federal bankruptcy law made it more complicated to file for bankruptcy to help stop abuse of the system. Yet according to the National Consumer Law Center, “the basic right to file bankruptcy and most of the benefits remain the same for most individuals.”

There are two main forms of consumer bankruptcy—Chapter 7 and Chapter 13. The biggest difference between Chapters 7 and 13 is the repayment of your debt. According to the U.S. Bankruptcy Court, in Chapter 7, certain debts (excluding student loans) can be eliminated completely, though you have no protection against losing assets that are facing repossession or foreclosure. This type of bankruptcy usually takes about half a year to complete. Filing a Chapter 13 is a much lengthier process (3 to 5 years), but your assets are protected and, in some cases, even saved. With a Chapter 13, however, the court approves a restructured repayment plan spread over the years that the bankruptcy is active.

Doing some research to determine if bankruptcy is an option for you is a good first step to take, but the importance of sitting down with a qualified attorney can't be understated. If you or someone you know is considering bankruptcy, don't go through it alone. Contact a dedicated Chicago-area bankruptcy lawyer today.

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