On Wednesday we discussed the basics of filing for Chapter 7 bankruptcy. But what do you do if you don't meet the requirements or don't want to have to sell your house? Your next option would be Chapter 13 bankruptcy.
The main difference between Chapter 7 and Chapter 13 is that a Chapter 13 filing reorganizes your debts before discharging any of them. After filing, you will have to create a three- to five-year plan to repay your debts. This plan has to be approved by a bankruptcy court before you can begin. As we alluded to before, Chapter 13 is usually for individuals who have more substantial incomes.
Just like a Chapter 7 bankruptcy, a Chapter 13 filing will show up on your credit score for a few years after you file. A Chapter 13 bankruptcy, however, will only show up for seven years after you finish your repayment plan -- three years less than a Chapter 7 filing.
For some Michigan residents, filing for bankruptcy may seem like a scary or even shameful thing. However, 1.2 million people filed for bankruptcy last year alone, and it's likely that many of those people found that bankruptcy was the best way to handle unmanageable debt. In fact, some lenders even view bankruptcy as a responsible way to handle debt.
Now that you know the basics of the two most common types of personal bankruptcy, hopefully you feel a little more prepared if you are considering bankruptcy. However, it is still important to work with an attorney to ensure that the process goes as smoothly as possible. Bankruptcy is a complicated process, so don't do it alone.
Source: Fox 12, "Know these bankruptcy facts before you file," Andrew Housser, April 15, 2013