Is Chapter 7 or Chapter 13 bankruptcy the right option for you?

Is Chapter 7 or Chapter 13 bankruptcy the right option for you?

On Behalf of | Jul 22, 2021 | Bankruptcy |

Finding yourself at the bottom of a stack of bills and dodging collection calls is a stressful and frustrating place. Bankruptcy may prove a viable choice when digging out of debt.

Chapter 7 and Chapter 13 allow individuals and couples to reboot their finances. While both provide financial relief, is one better? Understanding the differences may help you decide.

Do you have a steady income?

Job loss is a significant contributor to debt. Even if you find yourself reemployed, a lapse in income strains your finances. However, if you have a steady job, you may qualify for Chapter 13 bankruptcy. Under this option, the court restructures debt and gives you a single monthly payment. This repayment plan lasts anywhere from three to five years. At the end of the term, a judge discharges any leftover debt giving you a clean slate.

Do you have assets or property?

Depending on the amount of your debt and the type, you may want to pursue Chapter 7 bankruptcy. This may get you out of financial trouble faster than Chapter 13. You may not have the income to qualify for Chapter 13, and as such, Chapter 7 may provide the relief you need. Under this direction, a court-appointed trustee will sift through your debts and assets. You may need to sell off some or all of these assets to pay down debt and satisfy the court. This route does not mean you will lose your home or a vehicle. It does mean you may have to sell other things. Once you pay the calculated debt, the judge discharges the rest.

The choice on how to proceed depends on your income, household size and net worth. Regardless of how you go through bankruptcy, the result may free you of crushing debt.