If you’re thinking about filing for bankruptcy, you’ll want to carefully consider whether you’d benefit from filing for Chapter 7 or Chapter 13 bankruptcy relief. Each of these debt management solutions benefits a certain kind of filer. Therefore, you’ll want to weigh the pros and cons of both Chapter 7 and Chapter 13 bankruptcy before moving forward.
Generally speaking, Chapter 7 bankruptcy works well for individuals who don’t earn much income. By contrast, Chapter 13 bankruptcy tends to work well for steady income earners. However, there are exceptions to these broad rules, which is partially why weighing your options carefully is important.
What is Chapter 7?
Only members of low-income households are permitted to file for Chapter 7 bankruptcy relief. If you’re eligible for this opportunity, your qualifying unsecured debts (like overdue credit card balances, medical debt, etc.) will be eliminated once your case is closed. This elimination process is called a bankruptcy discharge.
Don’t be spooked out of filing for this kind of relief because you’ve heard that it’s commonly referred to as “liquidation” bankruptcy. If you don’t own a lot of unusually valuable property, you won’t need to worry about the risk that your non-exempt assets will be sold to repay your creditors.
What is Chapter 13?
If you earn a steady income, filing for Chapter 13 bankruptcy may be a great option for you. You’ll repay your creditors in truly manageable installments for 3-5 years before your remaining qualifying debts will be discharged.
If you’re eligible for both Chapter 7 and Chapter 13 bankruptcy relief, you’ll want to weigh your options before committing to a plan of action. If you’re only eligible to file for Chapter 13 bankruptcy, you’ll be in a position to move forward with confidence if and when you’re sure that filing for bankruptcy is the best debt management opportunity applicable to your circumstances.