Debt-laden consumers should understand the differences between Chapter 7 and Chapter 13 bankruptcy plans.

The pressure of unmanageable debt can have serious implications for Massachusetts residents. When looking at a mound of bills that are unable to be paid, consumers should evaluate their options. For some people, this may include filing for bankruptcy.

Because there are multiple types of bankruptcy plans, it can be difficult to know which one is right in a given situation. Understanding the basics of the available plans is important when making such a choice. Chapter 7 and Chapter 13 are the two forms of consumer bankruptcy.

A look at Chapter 7 bankruptcy

As explained by the U.S. Courts, Chapter 7 bankruptcies offer people a way to essentially wipe away most if not all of their existing debt. Consumers are not required to repay any debts that are included in their Chapter 7 plans. However, some assets may be seized and sold in order to repay some debts.

Assets subject to loss in Chapter 7 bankruptcies are those that are attached to some form of collateral such as automobiles or homes. Financial liabilities associated with these things are referred to as secured debts. Debts that do not have any form of attached collateral are called unsecured debts. Some examples include medical bills or credit card balances.

Some forms of debts are not able to be included in a Chapter 7 plan. Among these are child support awards and student loans.

The American Bar Association indicates that a Chapter 7 bankruptcy may be reported on a consumer’s credit report for 10 years.

A look at Chapter 13 bankruptcy

In contrast to Chapter 7 plans, Chapter 13 bankruptcies are essentially structured debt repayment options. Trustees monitor cases and outline a stipulated amount of money that debtors must pay each month. These monies are then used to repay creditors at least some of what they are owed. Payment plans will last between 36 and 60 months.

People must have sufficient income levels in order to qualify for Chapter 13 bankruptcy. Because these plans protect assets from being taken, they are often used by homeowners to avoid losing their homes . However, mortgages are not included in these plans and people must continue to make their mortgage payments in addition to their bankruptcy payments.

A Chapter 13 bankruptcy may be seen on a consumer’s credit report for anywhere between seven and 10 years.

Getting help with bankruptcy

Filing for bankruptcy requires close attention to many details. It is always best for Massachusetts residents to work with an experienced attorney at this time. Legal involvement can help people to choose the plans right for them.