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Which bankruptcy should I file: a Chapter 7 or a Chapter 13?

Question: I know I have too much debt and I need to file bankruptcy. I'm getting calls from debt collectors day and night (I keep my phone mostly turned off) and I am being sued on an old credit card bill. I really can't afford to get a wage garnishment and I need a fresh start. My credit is horrible and I need to rebuild it so I can get a house one day.

I started to get into debt in college, when I got my first credit card. I pretty much lived off of my credit cards and then I got laid off from my sales job. I was married, had a kid and got divorced and that cost me a lot of money. I know I'll be alright once my new job starts at a software company, but I do want to get rid of the debt that I've racked-up over the years.

What makes things worse is paying child support. That's a lot of money and because I'm pretty much broke it's hard to afford.

I want to know if I should file a chapter 7 or a chapter 13 bankruptcy. My friends have filed and they've told me that bankruptcy really helped them and it stopped the creditor harassment. But I'm not sure which type of bankruptcy I should file. Can you give me some advice?

N.S. in Alpharetta, GA

Answer: The type of bankruptcy you should file is really dependent upon your specific personal circumstances. Most people file a chapter 7. But not everyone can file a chapter 7.

For those people who can't file a chapter 7, there is a chapter 13. Basically, a chapter 7 eliminates all of your debts; it "discharges" them, gets rid of them.

A chapter 13 is also great. A chapter 13 is reorganization where you pay back a certain amount of the debt. With a chapter 13, the debtor is usually "debt-free" after 5 years. A chapter 13 can stop a foreclosure and a car repo. With a chapter 13, you don't have to worry about those horrible late fees or interest rate hikes.

Some people can't file a chapter 7 because their income is too high or because they have too much equity in their home. We help clients determine which bankruptcy they can file by doing an in-depth financial assessment of their specific financial circumstances.

Both chapter 7 and chapter 13 are proven, effective options for people who need debt relief. Both work very well and they stop creditor harassment, repossessions, lawsuits and garnishments.

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