Should You File For Chapter 7 or Chapter 13 Bankruptcy?


Deciding to file for bankruptcy to resolve your serious financial issues can be a big decision, however, this is only one of many decisions you may make during the process of seeking relief. The next important decision you will have to make is what type of bankruptcy is right for you.

If you are an individual, a married couple, or the owner of a sole proprietorship, the two main options are to file under either Chapter 7 or Chapter 13 of the United States Bankruptcy Code. While consumers are allowed to file under Chapter 11, these cases are relatively rare. The following are only a couple important factors to be considered when deciding which type of bankruptcy is best in your situation.

Your Income

In many cases, Chapter 7 may be the preferable option because the discharge happens relatively quickly and you are not required to make any monthly payments to the court for any period of time to earn the discharge. However, in order to qualify for Chapter 7 bankruptcy, you must pass something called the “means test.” This test uses your income and expenses to determine whether you have enough money to pay your debts. If the test shows that you have too much income, you may not be eligible for Chapter 7.

Your Property

Even if you do qualify for Chapter 7, you may opt to file under Chapter 13 if you own a significant amount of property or assets that you do not want to liquidate to pay your debts. Chapter 7 cases require the liquidation of certain property to pay your creditors as much as possible before the discharge. If exemptions do not adequately protect your property, Chapter 13 may be preferable in your case.

Contact an Experienced Salt Lake City Bankruptcy Attorney for Assistance

The above are only two of the several factors that should be discussed with an experienced bankruptcy attorney who can advise you on the option that will leave you in the most favorable financial position. At JLT Law, our Salt Lake City bankruptcy lawyer will thoroughly evaluate your case and guide you through the entire process. Call today at (801) 896-9444 for more information.