The most common question at a prospective client's initial consultation at P.R. Smith Law Group P.A. is, "What type of bankruptcy should I file?" Types of bankruptcy include:
- Chapter 7
- Chapter 13
- Chapter 11, usually reserved for businesses
- Chapter 20: a Chapter 7 followed by a Chapter 13 or vice versa
The answer to this question typically becomes clear after discussion about the client's debts, assets and income relative to the number of people you support in your home. A client's overall objectives as well as a close examination of advantages and disadvantages of Chapter 7 and Chapter 13 bankruptcy will shed further light on the question.The means test will determine whether the client is eligible for Chapter 7 bankruptcy. Its advantages over a Chapter 13 bankruptcy include the following:
- Most or all consumer debt is discharged — wiped out permanently — in a Chapter 7 bankruptcy, whereas in a Chapter 13, the debtor repays at least part of the debt.
- A Chapter 7 bankruptcy is usually completed within about four months, whereas a Chapter 13 bankruptcy generally takes three to five years to complete.
- A bankruptcy filer can reestablish credit much sooner in the case of a Chapter 7 bankruptcy than with a Chapter 13 bankruptcy.
- The overall costs to complete a Chapter 7 are lower than those required for a Chapter 13.
Which Type of Bankruptcy Looks "Better" on a Credit Report: Chapter 7 or Chapter 13?
When clients are eligible for Chapter 7 bankruptcy, we usually recommend it because of the lower costs and because it is a quicker path to reestablishing credit. Many people assume that because a Chapter 13 bankruptcy involves repayment of part of the debt, it will look better on a credit report. This is ironically not the case, since both are reported the same way as "bankruptcy" on the credit report, and the Chapter 13 discharge does not occur until several years after filing rather than several months as in the case of a Chapter 7.
How Long Will it Take to Reestablish Credit After a Chapter 7 or Chapter 13 Bankruptcy?
Many people also assume that because a bankruptcy will remain on a credit report for 10 years, they will be unable to get credit for a long time after a bankruptcy. In fact, however, many of our former clients receive credit offers to buy cars and obtain new credit cards very shortly after completing a Chapter 7. The date of the discharge is the starting point for reestablishment of credit. Many of our clients have been able to purchase homes at standard mortgage rates approximately two years after the discharge of a Chapter 7 bankruptcy.
What Types of Bankruptcy Might Apply to Your Financial Situation? Chapter 7, Chapter 13, Chapter 20? Free Initial Consultation at P.R. Smith Law Group, P.A.
For more information on which type of bankruptcy you should file or to speak with an attorney about your rights, contact the P.R. Smith Law Group to schedule a free initial consultation. Reach one of our Florida offices by calling 888-682-5251 toll free, and make a no-obligation appointment to discuss your case with a lawyer in Tampa, Lakeland, New Port Richey or Brandon.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
