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Your map through Chapter 7 and 13 bankruptcy

Posted
8/28/2013 8:00:00 AM
By: CreditCards.com
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You're tired of your phone ringing all day, getting hounded by creditors and your mailbox overflowing with bills you can't pay. You've decided that bankruptcy might be the solution for you. So, how does it work?

One of your biggest choices will be whether to file under Chapter 7 or Chapter 13. Either takes you through bankruptcy, though the journey will include different stops. 

We've created an interactive bankruptcy map to help you understand and navigate the parallel paths. ( Story continues below .)

Chapter 7 vs. Chapter 13
A Chapter 7 bankruptcy eliminates most debt, but some of your possessions might be sold to pay creditors. In order to qualify for Chapter 7 , you can't make more than the median income in your state and you can't have too much disposable income. By law, you can discharge your debts through a Chapter 7 bankruptcy only once every eight years. In some cases, if too little time has passed since a previous Chapter 7 discharge, then Chapter 13 bankruptcy might be an option.

In a Chapter 13 bankruptcy, you keep your property and make a court-supervised agreement to pay off all or part of your debt over three to five years. Some consumers choose Chapter 13 because they're not eligible for Chapter 7 or because it makes more sense in their situation. For example, Chapter 13 allows you to make up missed mortgage payments and save your house from foreclosure. After you finish your repayment plan, any remaining eligible debt is discharged. Some debts, such as back child support, must be paid in full before you can get a discharge.

See related: Is bankruptcy right for you? Our 7-point checklist will tell you 5 post-bankruptcy myths Explore all options before declaring bankruptcy