Holly SeaholmConsumer's Ed. 2-26-02 Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy Chapter 7 and Chapter 13 bankruptcies are full of advantages and disadvantages. But at the same time they are very different. Without knowing these differences a person could lose many things from money to possessions. Chapter 7 bankruptcy can wipe out most of ones debts but certainly not all of them.

Certain kinds of debt are not covered by the terms of Chapter 7. Some examples of debts that must be paid after filing for bankruptcy would include child support, alimony, income taxes and penalties, student loans, and court ordered damages due to unfair and unrighteous acts. Bankruptcy courts handle your financial problems until the case ends. A court assumes control of all ones debts that are owed and all property that is not exempted. A person, trustee, is appointed to be in charge of your debt. The trustee collects property that can be taken and sells it to repay some creditors.

That property can be surrendered to the trustee, one may pay the market value of it or one also may choose to trade exempt property with nonexempt property. A small number of people actually lose property when filing bankruptcy. If a person changes their mind about filing for bankruptcy they may ask the court to dismiss the case. At the end of the process the court would discharge most of the debts and one is unable to file for Chapter 7 bankruptcy again for at least another six years. Chapter 13 bankruptcy us mostly used to make up any type of debt payments and pay things off and in some cases it can be used to stop a foreclosure on a house.

Chapter 13 bankruptcy cases usually last up to 5 years. During that time one would have to live under a strict budget that would require discipline. Most debtors that file for chapter 13 bankruptcy never pay back all their creditors all that they owe. That can ruin your credit because it stays on file for at least 10 years.

Money management seminars are available to those that have paid 75% or more of their debt. Chapter 13 bankruptcy allows creditors to get at least some of their money back. Debtors keep all of their property and would out a compulsory, court-enforced plan to repay a portion of their debts over a certain period of time. With Chapter 13 bankruptcy some debts may be discharged but alimony and child support continue to be an obligation that must be fulfilled. Chapter 13 may seem like the better choice when ones options have all run out but filing bankruptcy creates a blemish on ones credit record that is very hard to overcome and may last for many years.

A person that is considering bankruptcy should first seek help. Non-profit organizations and commercial debt-adjustment firms are set up to counsel people and keep the financially sound. In most states it may be possible to file for bankruptcy without the help of a lawyer. This may not always be the wise choice because a lawyer can help explain what assets may be protected and which items that are exempted can be claimed. Bankruptcy can protect a debtor by helping them meet their financial goals and by giving them a fresh start. It can also help creditors by giving them a chance to reclaim at least a part of their money.

Bankruptcy should be a last resort because of the effects it can have on ones credit record. It leaves a blemish that is hard to repair and it can take a long time to over come it. But if one is in serious enough trouble bankruptcy may be their only choice that they have left. But first one should always seek guidance through a lawyer or another financial service.