It can be challenging to decide if it is better to file Chapter 7 or Chapter 13 bankruptcy. Both types of bankruptcy have advantages and disadvantages. Depending on your financial situation, one may be more beneficial for you and your family. If you aren’t sure which type of bankruptcy would be best, consider some of each type’s advantages and disadvantages.
Is Chapter 13 More “Responsible” and “Admirable?”
Many bankruptcy petitioners who seek out a bankruptcy attorney for help feel that filing Chapter 13 is better than filing Chapter 7 because they’re making an effort to pay back their debt; debt they knowingly took on and agreed to pay back. They feel that doing the right thing translates directly into “making an effort to pay back what they owe through a Chapter 13 bankruptcy.”
Do Creditors Look at Chapter 13 Bankruptcies More Positively?
In short, probably not. Many filers seeking information about filing Chapter 13 bankruptcy assume that financial institutions considering them for future credit opportunities will credit them for filing Chapter 13 and paying back a portion of their debt. They may even assume that doing so will mean a higher credit score post-bankruptcy than if they were to file a Chapter 7 bankruptcy ending in a debt discharge. In reality, it’s usually the opposite. When it comes to rehabilitating your credit post-bankruptcy, Chapter 7 is often the better choice because the timeline is so much shorter.
How Long Does Filing Bankruptcy Take?
Chapter 13 bankruptcy can last up to 5 years, and it isn’t easy to start repairing your credit until the process is complete. When seeking credit post-bankruptcy, most creditors will want to know if the bankruptcy is over; that is where they tend to focus. Typical Chapter 7 bankruptcy cases last only a few months from filing the petition to receiving a discharge. A Chapter 13 bankruptcy takes up to 3 to 5 years because that is the length of the payment plan Chapter 13 petitioners must complete. The Chapter 7 is much faster.
Which Bankruptcy Stays On Your Credit Report Longer?
Both Chapter 13 and Chapter 7 bankruptcy are bankruptcies, and they are listed as just that on your credit report. But there is one significant difference. The Chapter 13 bankruptcy stays on your credit report for seven years, while the Chapter 7 bankruptcy discharge is listed on your credit report for ten years. Chapter 7 stays on your credit report three years longer than Chapter 13.
Many people, just like you, are struggling to make ends meet and turning to bankruptcy. If you are worried about rebuilding your credit score post-bankruptcy, you’re not alone. If you need to talk about your options and how to get a fresh financial start by filing bankruptcy, trust the experienced Tennessee and Georgia bankruptcy attorneys at Kenneth C. Rannick P.C. We can help you determine your best options. We help good people through bad times every day, and we can help you, too.