Bankruptcy can be a difficult and overwhelming decision. There are two types or “chapters” individuals can apply for; chapters 7 and 13. In a chapter 7 bankruptcy, almost all debt is erased, this does not include certain taxes, student loans, secured debt or child support. In a chapter 13 your debt is reorganized so a portion is repaid. Knowing when and how to file for bankruptcy is important to know so the process goes as smoothly as possible.
There is a means test to determine which chapter you will qualify for. In a chapter 13, you are also required to prove your income to determine the amount of debt you will have to repay. A chapter 13 filing means your account will be managed by the court and they will decide how much you will pay your creditors. This requires a budget and determines how much of your income can be used to pay the debt and how much you will get to live on for the next several years. A chapter 7 bankruptcy can be completed or discharged in four to six months while a chapter 13 can take anywhere between three to five years to complete.
Both chapters can negatively impact your credit score down in the beginning, however committing to paying your new bills on time, every time, will help your score improve in the long run. A chapter 7 stays on your credit report for 10 years; a chapter 13 remains for seven years.
There are bankruptcy alternatives to consider when evaluating whether or not to file for bankruptcy. Here at DAL Law Firm we can assist you in a chapter 7 or chapter 13 bankruptcy. Call us today at 206-408-8158 for a free consultation or email us at [email protected]. We look forward to helping you.