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

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

Many people who are facing foreclosure seek bankruptcy protection as a way to save their homes. For some people, however, knowing which chapter to choose can be confusing. By taking the time to understand the basic differences between Chapter 7 and Chapter 13, developing a strategy for saving your home becomes much clearer.

Chapter 7: Not typically a good fit for homeowners

Chapter 7 bankruptcy is most often used to eliminate unsecured debt, such as credit card or medical bills. Home mortgages are secured by your home, making a Chapter 7 filing unlikely to be a fit for your needs. In addition, there is a strict income limit that must be met in order to qualify for Chapter 7, and people who own a home frequently exceed it.

Chapter 13: The bankruptcy path built for homeowners

Chapter 13 is, in many ways, a much more flexible solution that allows you to repay your debts over time according to a court-approved repayment plan. Perhaps the greatest advantage for homeowners is that they are able to repay any missed mortgage payments as part of their Chapter 13 plan.

Speak With An Attorney Before You Take Any Action Regarding A Foreclosure

If you are facing foreclosure, there are a number of important issues the need to be considered before you make a final decision. Talk to a lawyer so you can understand your options as well as the pros and cons associated with each one. Most bankruptcy lawyers offer a free initial consultation, so it won’t cost you anything to learn more.