Are you struggling with debt and considering bankruptcy? If so, you may be wondering which type of bankruptcy is best for your situation. Chapter 7 and Chapter 13 are the two most common types of bankruptcy for individuals. In this blog post, we'll explore the differences between Chapter 7 and Chapter 13 bankruptcy and help you determine which one is right for you.
Chapter 7 vs Chapter 13 Bankruptcy
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is often referred to as "liquidation" bankruptcy. This type of bankruptcy allows you to eliminate most of your unsecured debts, such as credit card debt and medical bills. In order to qualify for Chapter 7 bankruptcy, you must pass a means test that compares your income to the median income in your state. If your income is below the median, you may be eligible for Chapter 7 bankruptcy.
Chapter 7 bankruptcy is a relatively quick process, typically taking only a few months to complete. However, it's important to note that not all debts can be discharged in Chapter 7 bankruptcy. For example, student loans and taxes are generally not dischargeable.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is often referred to as "reorganization" bankruptcy. This type of bankruptcy allows you to restructure your debts and create a repayment plan that lasts between three and five years. Chapter 13 bankruptcy is often a good option for individuals who have a regular income but are struggling to keep up with their debts.
In order to qualify for Chapter 13 bankruptcy, you must have a regular income and your debts must fall below certain limits. Additionally, you must complete credit counseling before filing for Chapter 13 bankruptcy.
Which Type of Bankruptcy is Right for You?
The type of bankruptcy that is right for you will depend on your individual circumstances. If you have a lot of unsecured debt and your income is below the median in your state, Chapter 7 bankruptcy may be a good option for you. However, if you have a regular income and want to keep your assets, Chapter 13 bankruptcy may be a better choice.
It's important to note that both Chapter 7 and Chapter 13 bankruptcy have pros and cons. For example, while Chapter 7 bankruptcy allows you to eliminate most of your unsecured debts, it may also require you to liquidate some of your assets. On the other hand, while Chapter 13 bankruptcy allows you to keep your assets, it requires you to make monthly payments for several years.
Contact our Bankruptcy Lawyers
If you're struggling with debt, bankruptcy may be a good option for you. However, it's important to understand the differences between Chapter 7 and Chapter 13 bankruptcy before making a decision. At JLT Law, we can help you determine which type of bankruptcy is right for your situation. Contact us today to schedule a consultation.