DiTocco Law Group, PLLC
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Palm Beach County
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Choose the right bankruptcy option for you: Chapter 7 or 13

If you're considering divorce, you need to think about what kind of divorce you want to go through. There are two primary forms of divorce that people tend to choose, either Chapter 7 bankruptcy or Chapter 13. Chapter 7 is also known as liquidation bankruptcy, while Chapter 13 is a repayment plan.

Both types of bankruptcy have their benefits. For example, Chapter 7 bankruptcy can eliminate unsecured debts completely without having to make payments. You may lose some of your unexempt assets, but you'll still keep exempt assets.

With Chapter 13 bankruptcy, you'll repay what you owe over the course of three to five years. The payments may be lower than what you owe, allowing you to settle for less. You must make the payments on time and cannot miss one. If you do, your bankruptcy may fail, and you could be forced to pay everything back.

How do you decide which type of bankruptcy to go through?

The type of bankruptcy you choose usually depends on your financial situation. People who are below the poverty limit or who have debts that far exceed their income are more likely to qualify for Chapter 7 bankruptcy. On the other hand, people in heavy debt who still have a good income and who can afford to pay back a portion of what they owe will qualify for Chapter 13 bankruptcy.

Your attorney will talk to you about your financial situation before suggesting an application for Chapter 7 or Chapter 13 bankruptcy. You may need to take a means test to decide if you qualify for either form of bankruptcy. If you do not, then your attorney can talk to you about other debt consolidation or reduction plans that might be better than bankruptcy.

Will bankruptcy ruin your credit?

After you emerge from bankruptcy, you may find that your credit has taken a hit. It's normal to see your credit score decrease, and a bankruptcy usually stays on your record for 7 to 10 years. However, within a few months of the bankruptcy, you should begin seeing improvements in your credit score. No longer missing payments and reducing your overall debt should improve your credit, so if you continue to make good financial decisions, that action will help your credit score improve. After a few years, you should find that you're able to obtain credit and loans, mortgages and more with no further difficulties.

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