Many people who are looking at filing personal bankruptcy wonder if Chapter 7 or Chapter 13 bankruptcy is the better option. There are many things to consider when choosing the right bankruptcy plan for you. According to Credit Karma, you are likely to clear your debts faster with Chapter 7 but are liable to lose assets, while with Chapter 13 you are in a better position to keep your assets but it will take you longer to clear out your debt.
If you want to file Chapter 7 bankruptcy, you are going to have to prove to the court that you have no disposable income. This involves taking a specific means test to show your lack of income to the court. If you successfully do this, then you can qualify for Chapter 7. However, the biggest drawback to filing a Chapter 7 bankruptcy is that you are likely to lose assets in the process. This could involve losing a car or your home.
On the other hand, a Chapter 13 bankruptcy is more like an extended payback plan. If you are unable to get the clearance for a Chapter 7 bankruptcy due to having too much disposable income, you will be required to file a Chapter 13. Essentially, Chapter 13 Bankruptcy consolidates all of your debt and helps you work with your creditors in order to come back with a payment plan that is achievable for you. It will take you longer to clear out your debts with a Chapter 13 bankruptcy as compared to a Chapter 7, but you will likely be able to hold onto assets like a car or home during the process.
