If you intend to file for bankruptcy, there are a number of factors you need to take into consideration. One important decision you must make is choosing whether to file a Chapter 13 or Chapter 7 bankruptcy. There are significant differences between the two options, so it’s crucial to learn what these are before moving forward. The experienced bankruptcy lawyers at Pray Law Firm PA have helped numerous residents throughout the North Little Rock area of Arkansas successfully achieve debt relief.

Below, the bankruptcy lawyers explain the key differences between Chapter 13 and Chapter 7 filings:

• Debt Repayment: A Chapter 7 bankruptcy is typically referred to as a straight liquidation bankruptcy. This means you’re asking for your eligible debts to be completely discharged. A Chapter 13 bankruptcy, on the other hand, is designed as a repayment plan for those with regular income. With this filing, you’re responsible for repaying some or all of your debts over a specified period.

• Property Exemptions: To have your debt liquidated with a Chapter 7, you must agree to hand over any nonexempt property you own to a bankruptcy trustee. They will then sell it and distribute the earnings to your creditors. However, there is a list of property exemptions you’re allowed to keep, such as the equity in your home, vehicle, personal property, insurance, and retirement. A Chapter 13 doesn’t require you to forfeit any assets.
• Effect on Your Credit Report: A Chapter 13 bankruptcy will stay on your credit report for seven years from the filing date. However, a Chapter 7 will remain a matter of public record on your credit history for 10 years. In most cases, creditors prefer to see a Chapter 13 because it signifies the repayment of at least a portion of the debt.

Once you have a clear understanding of the characteristics that make up a Chapter 7 bankruptcy versus a Chapter 13, you can make an educated decision on what’s best for your situation. Your bankruptcy lawyer from Pray Law Firm PA will provide you with additional information and assist you with paperwork. Call (501) 771-7733 today for a free legal consultation.