Your Debts
Chapter 7 bankruptcy can wipe out the majority of unsecured debts. These are debts that are not backed by collateral, such as a mortgage or vehicle. Credit card debt, utility bills, and medical expenses are the most common forms of unsecured debt. When you file for Chapter 7 bankruptcy, these debts may be discharged through (a) a creditor write-off or (b) a liquidation of your assets. If the court authorizes asset liquidation, you may lose some of your assets in an effort to settle your debts.
Your Property
In general, your assets are more likely to be liquidated under Chapter 7 than Chapter 13. In Chapter 13 bankruptcy, you are striving to repay your debts and would be granted ownership rights to the asset once the debt is repaid. Exemption laws enable you to protect a portion of your assets during either type of bankruptcy. However, each state offers varying protection amounts and asset types. Before you file for Chapter 7 bankruptcy, you should investigate your state's exemption laws to determine whether your assets are at risk.
Your Credit Rating
It is true that a bankruptcy can remain on your credit report for up to seven years, but this does not mean that it negatively affects your credit. In fact, the majority of credit damage occurs before you even contemplate declaring bankruptcy. When your accounts become delinquent, your credit is damaged, and the longer the debts remain outstanding, the greater the damage to your credit. Due to the erasure of the delinquency status, many individuals find that filing improves their credit. In many cases, individuals can begin repairing their credit much more quickly than before filing.
In general, a Chapter 13 bankruptcy will be better for your credit than a Chapter 7 bankruptcy. The reason for this is that Chapter 13 allows creditors to designate your account as """"paid"""" as opposed to """"satisfied"""". If you are in a position to do so, it is always preferable to repay your debts.
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