Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy

Once you decide to file for bankruptcy you’ll need to determine which type of filing is best for you. While there are several different types of bankruptcy filings to choose from, the most common personal bankruptcy types are chapter 7 and chapter 13. The type of filing you choose will depend on whether or not you are able to pay any of your debts or if you need to receive a complete and total discharge.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is for individuals who simply cannot make payments towards their debts. Once you finish with the paperwork, counseling courses, and court appearances you will be given what is referred to as a clean, debt-free financial slate.

There are certain criteria you must meet in order to be allowed to file for chapter 7 bankruptcy. The first thing your bankruptcy attorney will do is complete a chapter 7 means test. The test considers your income and debts and determines whether you make enough money to pay off your debts in any way, shape, or form. If your adjusted income falls below the means level for your state you will be allowed to file for Chapter 7 bankruptcy.

Your creditors will be notified that you are filling for bankruptcy and will not be allowed to attempt to collect money from you again. While the courts may seize some of your property to pay off parts of your debt, those with little income or tangible property are not usually affected in this manner.

Chapter 13 Bankruptcy

Individuals who are unable to file for chapter 7 bankruptcy often opt for chapter 13. Under a chapter 13 filing you will be required to repay all or a portion of your debts. The courts will work with you and your court-appointed trustee to determine what type of payment plan you can reasonably agree to.

They will usually require you to make set monthly payment over a specified period of time, with a maximum of 5 years. During this time you are allowed to keep your property and the balance of your debt is discharged after you complete the agreed-upon payment plans.

While your creditors have the legal right to file an objection to your bankruptcy case, most will not do so unless they feel you fraudulently created your debt with the intent of filing for bankruptcy to rid yourself of it later on. In terms of chapter 13 bankruptcy, your creditors will have to accept whatever payment plan mandated by the court.

Chapter 7 and chapter 13 bankruptcy filings both require a lot of time and paperwork but the end result is almost always worth the effort. Contact a bankruptcy attorney for assistance with the paperwork and filing procedures and you’ll be on your way to financial freedom in no time flat.