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Having a lot of debt is a burden many individuals have shaking, so they see bankruptcy as a viable option. If you are one of hundreds of thousands of Americans who decide to file for bankruptcy each year in the U.S., you are probably wondering whether you should file for Chapter 7 or Chapter 13 bankruptcy.
Two Common Bankruptcy Types
Individuals or businesses that need relief from their debt have a few options they can choose from depending on their reason for filing, how much debt they have and their monthly income.
There are big differences between Chapter 7 and Chapter 13 bankruptcy including:
How your debts are discharged
What property you can keep
How long it takes to complete the process
Your monthly income
Chapter 7 vs. Chapter 13
Chapter 7
Chapter 7 bankruptcy is often referred to as liquidation because you must sell off key assets to pay off your debts. There is no payment plan to keep up, and the process is quick, just a few months as opposed to a year or longer of another bankruptcy structure. If you decide to file for Chapter 7, you need to be aware that you might need to sell your home or auto. Property exempt from Chapter 7 in Maine includes:
Residential property
Automobiles up to $5,000
Personal items or household goods valued under $200
Retirement benefits
Veteran’s benefits
More exceptions are listed in Maine Revised Statutes Title 14.
Chapter 13
Chapter 13 bankruptcy is a plan that allows you to pay off your debts through a structured payment plan that lasts between three and five years. During that time, your creditors are not allowed to pursue collection efforts.
Benefits of Chapter 13 include:
Allowing you to keep your home if it is in foreclosure
You also get to keep your auto
Better for your credit rating
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