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How are Chapter 7 and Chapter 13 bankruptcy different?

If you are facing overwhelming debt, filing for personal bankruptcy may help you and your family to get the fresh financial start you need. In addition to putting a stop to harassing creditor calls, filing may help you to reduce or eliminate unsecured debt, prevent foreclosure on your home and/or restructure your payments to be more manageable.

However, the type of bankruptcy you choose and the options available may depend on your specific circumstances and financial goals.

What is Chapter 7 bankruptcy?

You may choose Chapter 7 bankruptcy if you have a large amount of unsecured debt, such as medical or credit card bills, but do not have significant assets or a high income. Under Chapter 7, a bankruptcy trustee may collect and sell off certain assets to help pay your creditors. However, you may be able to keep much of your personal property under Texas’ state exemptions, and after filing you may be free of your unsecured debts.

How is Chapter 13 different?

Filing for Chapter 13 may be the preferred option if you have significant income or you want to keep assets that may not be exempt during bankruptcy. Under Chapter 13, you may have the opportunity to reorganize your debt so that you can make manageable payments to creditors over a period of 3 to 5 years.

If you are like many Americans, you may worry that filing for bankruptcy is financially irresponsible. However, by choosing to address your debt head-on instead of falling further behind, filing may be the exactly opportunity you need to get your finances back on track.


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