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Choosing between Chapter 7 and Chapter 13 bankrutpcy

Just about everybody runs into financial challenges from time to time. Although many people are able to resolve their financial problems and pay off their debts, there are many in Texas unable to take care of their overwhelming debt issues. For these individuals, filing for personal bankruptcy may be the answer. However, it is important to understand the difference between the two types of personal bankruptcies, Chapter 7 and Chapter 13.

A Chapter 7 bankruptcy will liquidate the petitioner’s assets in order to discharge most unsecured debts, which are debts not attached to a specific physical piece of property, such as real estate. Medical debt, credit card bills and many other consumer loans are considered unsecured debt. However, education loans are not included in debts that are dischargeable in bankruptcy, which means consumers will likely have to pay student loans even after a bankruptcy.

On the other hand, some people are not eligible to file for a Chapter 7, which means they will need to file for a Chapter 13 bankruptcy. This allows people to reorganize their debts, which will allow consumers three to five years to repay debts owed. Many people who wish to keep their home will file for a Chapter 13 bankruptcy to avoid further actions regarding bill collectors for unpaid mortgage debts.

However, each situation in Texas is different, and the specific circumstances should be evaluated when choosing between Chapter 7 and Chapter 13 bankruptcy. Choosing a personal bankruptcy will force a person to reconsider his or her values and goals in life. Applying the relevant laws to these personal values and goals will help a person make the correct choices in filing for a personal bankruptcy.

Source:, "The difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy", Lashawn Brown, May 23, 2014

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