• By: The Law Offices Of Diane Anderson
  • Published: March 9, 2016

Personal Bankruptcy: Chapter 7 Versus Chapter 13

Most individuals who file for bankruptcy do so under Chapter 7 or Chapter 13. While both types offer you comprehensive relief from your debt, they each have advantages and disadvantages. Thus, it is important to confer with a knowledgeable bankruptcy attorney to determine which type of filing is right for you. In fact, a lawyer can review your unique financial situation and help you understand what type of bankruptcy you qualify for and how it will impact your life.

Chapter 7

In order to file for Chapter 7 protection, you must pass the means test. The “test” is actually a mathematical formula that the bankruptcy court uses to determine whether an individual is abusing the system in an attempt to discharge debt that he or she can afford to pay. We will discuss the means test in future blogs, so please check back or contact our office to schedule an appointment.

The greatest advantage of filing a Chapter 7 is your ability to discharge or eliminate most (if not all) of your debt in a short period of time. Most typical Chapter 7 cases last three to five months, which is a fairly quick time period when you consider that many debtors discharge thousands of dollars of debt. It should be noted, however, that a Chapter 7 trustee has the ability to seize non-exempt assets to pay your creditors. Thus, if you have few non-exempt assets and no excess income after paying your basic living expenses, filing Chapter 7 could be an effective tool for obtaining relief from your debt.

Chapter 13

A Chapter 13 filing allows a debtor to reorganize his or her debt. In order to file a Chapter 13, you must have a regular source of income and your debt cannot exceed a certain level. The Chapter 13 process is usually beneficial to a debtor who has a valuable, non-exempt asset that they want to keep. The downside to a Chapter 13 is that it takes three to five years to complete the repayment plan. The debtor must make regular payments to the trustee during this time period and the trustee distributes the funds to the creditors according to the terms of the plan. Other advantages of filing a Chapter 13 include lien-stripping, catching-up past due mortgage payments, and several other benefits which will be discussed in future blogs.

At The Law Office of Diane Anderson, our lawyer has faced Chapter 7 bankruptcy. She understands the anxiety and fear that accompanies working through this process. But, after coming out on the other side, she started her own law firm and is living a life with less worry and strife. Contact us today to get the help and guidance you need in order to take control of your finances.

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