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The last decade has caused severe financial unrest all over the country, and while it appears the United States economy is now on the upswing, many Miami residents are still struggling under crushing debt. All want solutions, but a great deal of confusion exists on the best way to extricate themselves from their debt.

Two forms of bankruptcy proceedings may be the consumers’ only remaining options, but they must determine which will be the better choice for their personal situations.

Chapter 7 bankruptcy is the complete wipe-out, although it doesn’t negate debts from child support, back taxes to the Internal Revenue Service or student loan debt. Almost all creditors of unsecured debt walk away empty-handed when debtors file Chapter 7.

Secured debt that is owed for homes and cars can sometimes be reaffirmed and time extended to get current on payments. This allows most people to remain in their homes and keep at least one vehicle so they can work and get back on their feet once more.

When consumers file for Chapter 13 bankruptcy, the debt doesn’t disappear. Instead, a payment plan is devised over a five-year period to allow time to pay down the secured debt that was incurred. Homes, businesses or other property with liens against them must be paid off in their entirety. Unsecured debt also lingers, and a percentage is agreed upon that must be paid. Debtors and creditors sign off on a five-year payment plan that can be reasonably afforded by the debtor. As with Chapter 7 bankruptcy proceedings, there is no purging the trio of tax, student loan and child support debts.

Consumers contemplating bankruptcy must take a good, honest look at their financial missteps and develop prudent spending and saving habits to avoid this scenario in the future.

Source: Greer Today, “The difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy” Dave Ramsey, Jul. 28, 2014