Chapter 13

In Chapter 13 bankruptcy, you pay your unsecured creditors an amount between 0 and 100% of what you owe them. The exact amount is depends on these rules: (1) The minimum amount you must pay is equal to the amount your unsecured creditors would have received had you filed for Chapter 7 bankruptcy.

A Chapter 13 case will also remain on your credit report for up to seven years, but the time starts running from the date you file your case.

Your credit score after a Chapter 13 Bankruptcy discharge will vary. Your new score will depend on how good or bad your credit score was prior to the filing of the Chapter 13 Bankruptcy. For most individuals, you can expect to see quite a dip in your overall credit score.

Although a Chapter 13 bankruptcy stays on your record for years, missed debt payments, defaults, repossessions, and lawsuits will also hurt your credit and may be more complicated to explain to a future lender than bankruptcy.Declaring bankruptcy now can get you started sooner on rebuilding your credit.

Basics: A Chapter 7 bankruptcy will discharge most types of unsecured debt. The trustee will try to sell any significant nonexempt property in order to repay your creditors. Basics: In Chapter 13 bankruptcy, you repay your creditors (some in full, some in part) through a Chapter 13 repayment plan.

In many cases, Chapter 7 bankruptcy is a better fit than Chapter 13 bankruptcy. For instance, Chapter 7 is quicker, many filers can keep all or most of their property, and filers don't pay creditors through a three- to five-year Chapter 13 repayment plan.

In Chapter 13 bankruptcy, you must devote all of your "disposable income" to repayment of your debts over the life of your Chapter 13 plan. Your disposable income first goes to your secured and priority creditors. Your unsecured creditors share any remaining amount.

Chapter 13 Is Likely to Worsen Your Finances When your Chapter 13 case is dismissed, you are often in a far worse financial position. That's because the interest on your unpaid debts has continued to mount as you've struggled to make payments. And once you're out of bankruptcy protection, you have more debt than ever.

Your credit will suffer when you file a Chapter 13 case, but it will drop from your credit report years before a Chapter 7 case would. Your credit report will reflect your decision to file bankruptcy for years after you file, so there's no escaping the reality that filing bankruptcy will negatively affect your credit.