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Chapter 7 bankruptcy is generally the cheapest type of bankruptcy to file. Attorney fees for this type of bankruptcy are usually far lower than those for a Chapter 13 bankruptcy.
A Chapter 7 bankruptcy wipes out mortgages, car loans, and other secured debts. But if you don't continue to pay as agreed, the lender will take back the home, car, or other collateralized property using the lender's lien rights.
Chapter 13 Bankruptcy is Bad For Your Finances Money you had paid in the payment plan suddenly is applied to interest on debts that had been held in abeyance, which means you will owe more than when you started.
The average bankruptcy packet ranges from 40 to 50 pages in length.
Of the two options, Chapter 7 is more popular because filers don't have to pay back part of their debts. Chapter 13 may be a better solution if you're in arrears on your mortgage because you can keep your house in Chapter 13 and have time to get caught up on payments.
If you still have a solid job or way to make money, but simply can't afford to fully pay what you owe, Chapter 13 is a good option to take. It lets you maintain more control over your finances and assets than you would with a Chapter 7 bankruptcy.
Not All Debts Are Discharged Certain debts will remain on your account when you file for Chapter 7 bankruptcy. You will still be responsible for alimony and child support. Tax liens, student loans, and personal injury debts caused by intoxicated drivers are still on the docket, as well.
The biggest difference between Chapter 7 and Chapter 13 is that Chapter 7 focuses on discharging (getting rid of) unsecured debt such as credit cards, personal loans and medical bills while Chapter 13 allows you to catch up on secured debts like your home or your car while also discharging unsecured debt.