Which type of bankruptcy is right for me?

There are two common versions of bankruptcy that people hear about: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. The question then becomes which one is right for me? Allow me to break it down for you.

Chapter 7 bankruptcy is a way an individual can liquidate their assets to pay their creditors. Chapter 7 bankruptcy provides relief to debtors who cannot make regular, monthly, payments towards their debts, and it provides relief regardless of the amounts owed or whether the debtor is solvent or insolvent.

The large downside of a Chapter 7 is that it requires an individual to sell significant portions of their assets in order to repay as much of their debts as they can. Some assets are exempt, but not all of them. For instance, family heirlooms, vehicles, and homes are all possibly not exempt. But items such as household appliances, pensions, public benefits, and a portion of equity of ones home are possibly not exempt. These are just a few examples, but it is not a comprehensive list. Some assets may be exempt up to a certain value. In reality, each asset will be evaluated whether it is exempt or not.

On the other hand, Chapter 13 is not a liquidation of assets. Rather, it is a reorganization of the debts which allows them to be repaid in installments. A Chapter 13 bankruptcy is only available to individuals with regular income to repay their debts over three to five years.

Chapter 13 has significant advantages over a Chapter 7. For instance, a Chapter 13 bankruptcy offers an opportunity to save one's homes from foreclosure. If your home is in foreclosure, a Chapter 13 will put a stay on the foreclosure proceedings.

If you are thinking about filing for bankruptcy, please feel free to call our office and to discuss which Chapter may be right for you.