Is it better to file a Chapter 7 or 13? Most people prefer Chapter 7 bankruptcy because, unlike Chapter 13 bankruptcy, it doesn’t require you to repay a portion of your debt to creditors. In Chapter 13 bankruptcy, you must pay all of your disposable income—the amount remaining after allowed monthly expenses—to your creditors for three to five years.
Why would you file for bankruptcy? If you have large debts that you can’t repay, are behind in your mortgage payments and in danger of foreclosure, are being harassed by bill collectors—or all of the above—declaring bankruptcy might be your answer.
What do you lose when you declare bankruptcy? Bankruptcy will eliminate most of your debts, such as unsecured debts including credit card bills, medical bills, and payday loans. You may still be required to pay your secured debts, such as your mortgage or motor vehicle loan. Some debts cannot be eliminated by your bankruptcy.
What is the downside of filing for bankruptcy? Filing for bankruptcy can negatively impact your immediate financial future. Obtaining credit after filing for bankruptcy could mean increased interest rates. Obtaining credit after filing for bankruptcy might require security deposits.