Filing for bankruptcy can be a powerful tool for debt consolidation and relief. It can help you get out from under the financial burden weighing you down. If you’re considering filing for bankruptcy, you may be wondering whether you should file Chapter 7 bankruptcy or file Chapter 13 bankruptcy. The right choice depends on your current income, assets, debts, and your future financial goals.
Chapter 7 bankruptcy can be a relatively quick way to wipe out general, unsecured debt like medical bills and credit cards, and it requires no repayment. It is designed for people with little to no disposable income available to pay back a debt. Although it wipes out most debts, it doesn’t clear particular types of debt such as taxes, student loans, or unpaid child support and alimony. When you file Chapter 7 bankruptcy, your nonexempt property is sold to pay back your creditors. The “means test” will help determine if you’re eligible to file Chapter 7 bankruptcy. If you make more than the median income of your state and have some disposable income to pay off a debt you may be forced to file Chapter 13 instead.
In Chapter 13 bankruptcy, instead of debt being completely wiped out, it is restructured with a manageable three- to five-year repayment plan. It is generally used by people with a regular income who are behind on payments on nonexempt assets they would like to keep. It may help people who are behind on home or car loans to keep their assets while paying them off over time.
Once you’ve determined your eligibility to file Chapter 7 bankruptcy using the “means test” mentioned above, some of the advantages of Chapter 7 bankruptcy include:
If you make too much money to qualify to file Chapter 7 bankruptcy, Chapter 13 may be your only choice. However, there are circumstances you may choose Chapter 13 because it’s more advantageous to you. If you are in one of these situations, Chapter 13 may be the better fit.
If you’d like to experience freedom from the stress of overwhelming debt, bankruptcy may be the right choice for you. The experts at Parker & DuFresne can help determine which bankruptcy filing is best for your personal circumstances and help you take control of your finances. Contact us today to schedule a consultation.
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