In Chapter 13 bankruptcy, you agree to pay your creditors a predetermined amount over the course of three to five years. Under Chapter 13, you may be required to devote up to 100 percent of your income to the repayment of the agreed-upon settlements, which creditors typically require to be substantial (though occasionally only partial). You don't lose your assets like your home, vehicle, or investments. This is typically the most advantageous form of bankruptcy, particularly if you have a high income, and it causes the least harm to your credit score.
In Chapter 11 bankruptcy, debts are restructured so that they can be effectively managed and creditors are paid. Creditors frequently accept a loss against what they would have received in exchange for more timely repayments of what they will receive. Chapter 11 bankruptcy requires a great deal of attorney labor and is the most costly form of bankruptcy.
In Chapter 7 bankruptcy, all of the debtor's assets are liquidated to repay creditors. Those creditors, such as mortgage holders, who took the least risk in lending to you (i.e., there was collateral) are repaid first, followed by the creditors who assumed the greatest risk. This type of bankruptcy is typically utilized only by business proprietors.
Often, debt management counseling programs are preferable to declaring bankruptcy. These counseling programs have no negative impact on your credit score and are a clear indication that you intend to repay your debts in full, although you may need additional time to do so. Instead of proceeding through the court system, where they must spend time and energy attempting to collect as much as possible from you, creditors typically prefer to have their principal and interest returned to them.
Debt settlement programs are also something you should consider if debt management does not appear to be effective. Debt settlement programs will have a negative impact on your credit score, but not as severely or for as long as bankruptcy. In debt management programs, you employ a company to negotiate with your creditors in an attempt to convince them to accept the lowest acceptable repayment options.
If you have no other option but to file for bankruptcy, you must be prepared to appear before a judge and explain how you got into this mess in the first place. Upon obtaining a court order allowing you to file for bankruptcy, you must be prepared to lose all of your credit cards, with the possible exception of those with a $0 balance at the time of filing.
In addition, the bankruptcy will remain on your credit report for a lengthy period of time -- ten years if it's a total discharge, seven years if it's a partial or resolved repayment. This can affect your chances of obtaining a mortgage, other types of financing, credit cards in the future, and even a job, although the latter is unfair. Because it is permanent, bankruptcy is considered one of the five most traumatic experiences a person can endure. Therefore, consider all of the above alternatives before filing for bankruptcy.""
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