Consumer Bankruptcy: Should I file Chapter 13 or 7?
Steven J. Feldman
There are two main options under the U.S. Bankruptcy Code for people seeking financial relief by filing bankruptcy.
Chapter 7 Bankruptcy
For people with little income, few assets and mounting credit card bills or medical debt, filing Chapter 7 bankruptcy may be a good option because it allows a discharge of unsecured debt—that means the bankruptcy filer is no longer responsible to pay on those debts! This is typically a good debt-relief option for people who own little property, are having a hard time making ends meet and have very little “disposable” money at the end of the month. The Chapter 7 bankruptcy process moves quickly—you could be freed of your unsecured debt (like credit card and medical debt) within just a few months! The “catch 22″ is the “mean test” dollar limitation, which means that you have to file under Chapter 13.
Chapter 13 Bankruptcy
For others, filing Chapter 13 bankruptcy may be a good way for them to get on a repayment plan so they can payoff their secured debts (like a mortgage). Typically, a Chapter 13 bankruptcy filer is given between 3 and 5 years to catch up on their late accounts and they’re allowed to keep their homes during the process. Chapter 13 bankruptcy may be a good option for people who have regular income and can pay for general living expenses but are having a tough time making payments on secured debt, like their home.
Please use the sidebar form for a free 10 minute conference.