For those individuals who are ineligible for or who simply do not wish to file a Chapter 7 Bankruptcy, filing for Chapter 13 Bankruptcy may be the best option. While these two methods of debt relief are similar, a Chapter 13 Bankruptcy will not have such a negative or long lasting impact on one’s credit report, and it will also allow an individual to keep some of his assets if applicable. When a person files for Chapter 13 Bankruptcy, he or she will receive a court approved plan that will provide guidelines and rules for paying off existing debts.

While there are many benefits to filing for Chapter 13 Bankruptcy, individuals should be sure to speak with an attorney or with a trusted financial advisor before making the decision about which type of bankruptcy to file. Every situation is different, and what is the best option for one person will not always be the best option for another. When speaking with advisors or with bankruptcy attorneys, debtors should be sure to bring along financial records and other pertinent information dealing with their financial states.

If, after this process, the debtor decides to continue with filing for Chapter 13 Bankruptcy, he or she will need to fill out, with the aid of the advisor or attorney, a Chapter 13 Plan. This plan will be subject to several different requirements, many of which will vary by state, making it all the more important for valid and trustworthy help to be sought during the filing process. The plan must show that all unsecured creditors will receive as much money as they would have if the individual had chosen to file Chapter 7 Bankruptcy and that the debtor will repay all creditors, often by the use of all disposable income, by making payments to the Chapter 13 plan for as long as is required by his or her median household income.

It is important to note that a Chapter 13 Bankruptcy is not a “quick fix.” In fact, it is a much longer process than filing for a Chapter 7 Bankruptcy. However, a Chapter 13 Bankruptcy will only remain on the individual’s credit report for 7 years, as opposed to the ten years a Chapter 7 stays on one’s report, and will generally not be looked upon as unfavorably by future creditors. A Chapter 13 Bankruptcy may also stop pending foreclosures, discharge some debts that the Chapter 7 will not, lower the amount of the debt to be paid in certain circumstances, and stop co-debtors or co-signers from being subject to collections bureaus and agencies. For many, then, filing for Chapter 13 bankruptcy is a much better solution than filing for Chapter 7 bankruptcy.

Neither type of bankruptcy, however, should be one’s first option for managing debt. Both types of bankruptcy can be hard to recover from, and it will take a concentrated effort on the part of the individual to restore and rebuild credit. If one has exhausted all other options for clearing or paying off debt, though, filing for bankruptcy is likely a good choice. What matters most is that one files for the right type of bankruptcy, understands the proceedings and his or her responsibilities, and uses the experience to improve the overall quality of life and to build a better financial future.