Many people carry misconceptions about the bankruptcy process, most of which are due to a lack of knowledge about how bankruptcy works. When looking for debt relief it is important to know the difference in your Tampa bankruptcy options.
A Debtor’s Plan
The main difference between Chapter 13 bankruptcy and Chapter 7 bankruptcy is how your debts will be resolved.
Chapter 13 is essentially a form of debt consolidation, in which the bankruptcy court will develop a debtor’s plan for your payments to creditors. Rather than having your debts erased or satisfied through asset liquidation, as in Chapter 7, Chapter 13 rolls all over your debts into a single monthly payment.
While most creditors do receive payment for the debts, not all creditors will be paid and certainly not paid in full. The court determines how much you are responsible for paying based on your total debt-to-income ratio. In other words, your payments will be based on your individual financial situation.
For many people, Chapter 13 is a better option because it allows them to satisfy their debts over a period of three to five years without the hassle of continued debt collection calls, added interest or penalty fees. Additionally, Chapter 13 is a great option for resolving secured debts such as mortgages or car loans, which may be at risk of foreclosure or repossession.