Knowing the benefits of each may be a contributing factor in your decision. However, the best way to know which is right for you is by consulting a bankruptcy attorney because there are requirements you must meet for each type.

Chapter 7

Chapter 7 wipes out most of your obligations to repay unsecured debt and is best if you do not have many or high-value assets.

  1. You eliminate most debts: Chapter 7 does not require you to pay anything to most creditors. Exclusions include child support and recent taxes.
  2. You can take advantage of state exemptions: Although you can only retain some types of property, other assets may have protection under Illinois exemption laws.
  3. You finish the process sooner: Your case is usually over within a few months, whereas with Chapter 13, you have a commitment to a repayment plan for three to five years.

It is important to note that your income may be too high to qualify for this type.

Chapter 13

Chapter 13 entails a plan to repay a portion of unsecured debts.

  1. You get to keep your property: Unlike Chapter 7, you can keep more of your assets because you are still paying for them.
  2. You learn better money management: Following a plan and sticking to a strict budget will help you prevent going bankrupt again.
  3. You can rebuild your credit faster: Chapter 13 stays on record for a minimum of seven years, but you can qualify for secured credit cards within months and for loans in under two years. Making on-time payments will help raise your credit rating.

No matter which you file for, bankruptcy also puts an immediate end to creditor harassment, repossessions and wage garnishment. Bankruptcy may be frightening or stressful, but it gives you a fresh financial start, and the negative consequences will not last forever.

When you are under a good deal of stress, mistakes are easy to make, but here are five common missteps that could be damaging to your petition for bankruptcy.

Submitting an incomplete list of creditors

Skipping a creditor when you prepare your list may be a simple error given all the various bills you might have. On the other hand, you may want to keep a special account out of the mix. However, the law requires you to include all creditors when you file for bankruptcy.

Trying to hide assets

You may have an additional bank account you feel tempted to keep from view. You might consider transferring money to a friend or family member for safekeeping until you finalize the bankruptcy. Keep in mind that hiding assets is against the law. By doing so, you could jeopardize your filing, you might have to pay a fine and you could even face a prison sentence.

Repaying a family obligation

Perhaps you wish to repay a debt owed to a relative ahead of your filing because you do not want to include it in the bankruptcy process. The bankruptcy trustee may see that as a “preferential” payment and disallow it, in which case, your relative would have to return that money and pay it to the trustee.

Enjoying a spending spree

Many people think they can go on a spending spree before filing for bankruptcy. They reason that charging more debt to their credit cards at this point would not matter. Do not become a member of this misinformed group; the additional debt may not be dischargeable. Stop using your credit cards.

Not acting promptly

An experienced bankruptcy attorney will tell you not to delay filing for bankruptcy because your delinquent debts will just continue to snowball. You may have lost your job. You may be struggling under a mountain of medical bills. Whatever the circumstances, bankruptcy is a legal solution for getting out of debt. The faster you act, the faster you can enjoy a fresh new start for your life.

You have a family, a home and a job, and you are leaning toward filing Chapter 13, but you still have questions, not only about the process itself but also about the long-term consequences.

Looking to the future

You are certainly not alone in considering bankruptcy: In 2016, about 800,000 people filed across the country, reports Yahoo Finance. Some debt remains under Chapter 13.

Here are a few examples:

  •         Child or spousal support payments
  •         Tax debts that are less than three years old
  •         Certain fines, such as those you owe for a DUI conviction
  •         Any fraudulent debt you may have incurred

Of course, few if any of these examples may apply to you. If you choose to file Chapter 13, you can look forward to the end of certain kinds of creditor action, such as wage garnishment, vehicle repossession and the threat of foreclosure on your home.

The next step

Having done a good deal of homework on Chapter 13, the next step is for you to seek legal guidance and get answers to all your questions. Ultimately, the decision to go forward with Chapter 13 rests with you. Obviously, this is a big decision to make, but armed with the information you seek plus experienced legal representation, you will likely find that you are much more comfortable with the idea of filing for bankruptcy.