Once you lose control over your finances, it becomes increasingly difficult to get it back. You may have to pay fees and interest on unpaid debts, making it harder and harder for you to see the light at the end of the tunnel. However, some people in your shoes seek to get a fresh start by filing for bankruptcy. If you decide to pursue a consumer bankruptcy, you may do so through either a Chapter 7 or a Chapter 13 format.
Per Quicken Loans, there are some important differences that exist between Chapter 7 and Chapter 13 bankruptcies. The more you understand about how they differ, the more you might be able to determine which type might better suit your needs.
Chapter 7 bankruptcies
If your income is low enough, you may be able to pass the means test needed to pursue a Chapter 7 bankruptcy filing. Chapter 7 bankruptcies are liquidation bankruptcies. This means there is a chance you may have to liquidate some of your assets to pay back what you owe your creditors.
Chapter 13 bankruptcies
If you do not qualify for Chapter 7, or if you have fears about possibly losing your home or other valuable assets, you might want to consider a Chapter 13 filing. Chapter 13 bankruptcies involve restructuring your outstanding debts in a manner that allows you to pay back at least part of what you still owe. If you keep current on your new arrangement and existing mortgage, you should be able to keep your home with a Chapter 13 filing.
Typically, it takes between three and five months for your debts to undergo discharge in a Chapter 7 filing. A Chapter 13 bankruptcy may take between about three and five years to finalize.