Personal bankruptcy can be handled in two different ways, under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Chapter 7 is used primarily for low-income debtors who own few assets and little cash. Chapter 13 is a restructuring of debt, used by people who have some financial security but need help with repayment of their debts, such as through refinancing or debt consolidation. Here are some of the main differences between these two types of bankruptcy.
Chapter 7
You will have to qualify through a means test which determines how much income and possessions of value you actually have. The advantages of Chapter 7 are:
- Your unsecured debt can usually be cancelled
- The whole process is pretty quick and may only take a few months.
- Creditors cannot attempt to collect from you.
Chapter 13
If your unsecured debts are less than $360,475 and your secured debts are less than $1,081,400, you are eligible to file Chapter 13. The advantages to this type of bankruptcy are:
- Your property is not seized, with some exceptions
- You can work out a repayment schedule that is manageable for you and have years to pay back
- Your payments are made to a trustee to forward to your creditors so that they have no direct contact with you
If you have concerns about which type of bankruptcy best applies to you, seek professional advice from a contact us today!
