Chapter 7 Or Chapter 13: Know Your Options

If you need to file for bankruptcy, the first step is to find out which type of bankruptcy is right for you. Chapter 7 bankruptcy and Chapter 13 bankruptcy offer relief from a variety of types of debt, including credit card debt, medical debt and mortgage debt. Here are some important things to understand before filing:

Chapter 7 Bankruptcy

• Chapter 7 bankruptcy is known as “liquidation bankruptcy.” That means certain items of property are sold to pay back creditors.
• Chapter 7 bankruptcy is generally for people who do not have enough income to pay back all or a portion of their debts.
• Some of your personal property may be exempted from liquidation under Chapter 7. For example, you may be able to take advantage of the homestead exemption, the retirement account exemption or the personal property exemption. However, there are value limits on the exemptions, and you should speak with a bankruptcy attorney about your specific situation.
• To qualify for Chapter 7, you must pass a “means test.” If the means test shows that your income is too high for you to file for Chapter 7, you may still file for Chapter 13 bankruptcy.
• Filing for Chapter 7 places an automatic stay on creditor actions. That means creditors may not contact you to try to collect a debt once you have filed for bankruptcy protection.

Chapter 13 Bankruptcy

• Chapter 13 bankruptcy is known as “reorganization bankruptcy.” That means your debts are reorganized into a court-approved repayment plan that lasts three to five years.
• Chapter 13 does not require you to sell any of your property to pay back creditors.
• Chapter 13 is designed to help you get caught up on any back payments on secured assets like your car or home.
• If you get caught up on secured debts, you can keep the associated property, and any remaining unsecured debts may be discharged.
• Filing for Chapter 13 places an automatic stay on creditor actions. The creditors receive their payments through the court-approved repayment plan, which is overseen by an assigned bankruptcy trustee.

Contact Hill Law Office

Hill Law Office offers free initial consultations regarding bankruptcy. To make an appointment, please call us at 701-293-7612 or contact us by email. Our office is located in downtown Fargo, close to the federal courts where bankruptcy proceedings are held. We advise and represent clients in North Dakota.