If you are a Minnesota resident struggling under a heavy debt load, you may be thinking about filing bankruptcy so as to get most of your debts discharged and give yourself a new financial start. If so, you likely have many questions about which type of bankruptcy is right for you, Chapter 7 or Chapter 13.
The answer to that question depends upon your own circumstances, since both Chapter 7 and Chapter 13 have their own respective advantages and disadvantages.
When you file for Chapter 7, you become one of the 71 percent of people who choose this type of bankruptcy. Most of them choose Chapter 7 because it is the simplest and quickest type of bankruptcy. Additionally, since most people’s debt problems come from having an overabundance of consumer debt, Chapter 7 discharges virtually all of such debt, including credit card debt.
The two possible deal-breakers to Chapter 7 are that you must meet Minnesota’s income guidelines in order to be able to file this type of bankruptcy, and that Chapter 7 will not prevent your home from going into foreclosure. It can, however forestall a foreclosure.
While Chapter 7 discharges much of your debt, Chapter 13 gives you the opportunity to reorganize your debt instead. A Chapter 13 bankruptcy takes more time, usually three or five years, but during this period, most debtors get caught up on their debts after renegotiating them with their respective creditors. This holds true for the amount of your mortgage and its monthly payments, too, making Chapter 13 a better vehicle if saving your home from foreclosure is one of your biggest goals.
Some people see the longer length of a Chapter 13 bankruptcy as a deal-breaker, but if you have no problem with being on a strict budget for that period of time, Chapter 13 may be your best option.