Both Chapters 7 and 13 will provide overburdened consumers with some financial relief. While there are many different types of bankruptcy, Chapters 7 and 13 are used often. All types of bankruptcy are named for the code number that covers bankruptcy laws. The one you chose is based on your needs and your financial situation. For some basic information about how these types of bankruptcy differ, read below. For more in-depth information, speak to a bankruptcy lawyer.

Most Popular: Chapter 7 

Many people choose Chapter 7 because of its expediency. In most cases, you can be totally free of all sorts of debts in a short amount of time. No matter how long it took to accumulate that debt load, most credit card, medical, and personal loan debts are wiped out with Chapter 7. Some more recent tax debts may remain, however. Chapter 7 is also easier to deal with than Chapter 13. In most cases, a single court appearance is all that is necessary, and then you are free and clear. Chapter 13, on the other hand, requires a repayment plan that must be adhered to for several years.

The negative aspect of a Chapter 7 filing is the potential to lose your property. Though homestead and personal exemptions protect some property, those with a lot of assets could lose them to forfeiture. Another potential stumbling block for Chapter 7 filers is the limit on income. Filers may run into problems if their income is above their state's median.

Owing Your Debts: Chapter 13

Known as a reorganization plan, Chapter 13 is more complex and can take several years to be complete. With this plan, your bankruptcy lawyer negotiates with your creditors to reduce balances, remove penalties, eliminate interest, and more. Then, a debt repayment plan is created allowing the filer to make low, easy payments toward paying off the debt. Some consumers appreciate being able to take responsibility for their debts while still obtaining some financial relief. Another positive of Chapter 13 is that there are no income restrictions as with Chapter 7. Filers with a lot of property unprotected by exemptions might also want to consider filing Chapter 13

What Else To Know

You don't have to stick with one filing. In some cases, you can file for one and then switch to another if needed. Also, both Chapters 7 and 13 provide filers with the immediate protection of the automatic stay, which temporarily halts all debt collection activities and punitive court actions.

To help you decide which filing is right for you, speak to a bankruptcy lawyer.