When you decide to declare bankruptcy in Virginia, you must then decide which type of bankruptcy is right for you: Chapter 7 or Chapter 13. Chapter 7 bankruptcy, or "liquidation" bankruptcy, as it is commonly referred to as, involves the liquidation of all a debtor's assets to repay creditors. Chapter 13, on the other hand, is a "reorganization" bankruptcy. When you file for this type of bankruptcy, your debts get reorganized in such a way that allows you to repay your debts via low monthly payments over a longer period of time.
Though Chapter 7 is preferable for individuals with few resources to spare, it is not ideal for those with significant assets, such as a home, vehicles or other valuable property. Chapter 13, on the other hand, is. According to FindLaw, Chapter 13 offers numerous benefits that Chapter 7 does not.
For one, Chapter 13 allows you to avoid foreclosure. Under this type of bankruptcy, the courts will give you the opportunity to make up for delinquent payments over the course of three to five years. The courts will set your payments to something you can reasonably afford given your current expenses and income.
Your credit score will also benefit from your filing Chapter 13 over Chapter 7. If you file for Chapter 7 bankruptcy, your credit will suffer for the next 10 years. However, when you file for Chapter 13, it will only affect your credit for seven years.
Finally, Chapter 13 allows debtors to rearrange secured balances and spread them over the life of the bankruptcy term. This is not possible with a Chapter 7.
The information in this post is designed to be purely educational. It is not meant to be construed as legal advice.