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Factors to consider when deciding between Chapter 7 and Chapter 13 bankruptcy, P.3

In our last two posts, we've been looking at some of the factors that should be taken into consideration when deciding which form of bankruptcy to pursue. We've already mentioned the debt limits imposed in Chapter 13 bankruptcy, as well as the income limits of Chapter 7 bankruptcy. We also referred to the need, in Chapter 13 bankruptcy, to have a sufficient ongoing income to support payments under the court-supervised repayment plan.

We've also mentioned the impact bankruptcy has on a debtor's credit health. As we noted, both forms of bankruptcy remain on one's credit score for a number of years after the process is complete. Both forms of bankruptcy will also result in a significant drop in a debtor's credit score for some debtors. 

When it comes to considering the credit impact of bankruptcy, debtors are probably better off thinking about how any bankruptcy filing will impact their credit than about how a Chapter 7 or Chapter 13 filing will impact their credit differently. The fact is that any bankruptcy filing will result in weakened credit health, and it will be necessary to rebuild one's credit afterward. This is not an impossible task, but it does take time and a willingness to start out at the bottom in terms of credit offerings.                                              

Typically, starting over in terms of credit means being willing to accept credit cards and loans with high interest rates and perhaps which require security. Actively making use of such offerings and paying off one's bills regularly can help one to get back on track with credit.

In our next post, we'll look at a final area of consideration when determining which form of bankruptcy is appropriate for one's situation. 

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