At Groff Law Firm, PLLC, we understand that filing for bankruptcy is not a decision people come to lightly or without considering all the alternatives. However, there are some situations in which it is your best option for getting back the financial stability you deserve. When you file for bankruptcy, one of the first decisions you’ll have to make is what type of bankruptcy to file, so in this article, we will be going over the differences between the two main categories: chapter 7 and chapter 13 bankruptcy.
- Chapter 7 Bankruptcy- With chapter 7 bankruptcy, almost all your general unsecured debts, such as credit cards or medical bills, are immediately wiped out, without the need for a repayment plan. However, to pay back your creditors as much as possible, you may be required to sell your nonexempt property. There are certain requirements that you have to meet in order to be eligible for this type of filing–for example, if you exceed a certain income threshold, you’ll have to file chapter 13 bankruptcy.
- Chapter 13 Bankruptcy- With chapter 13 bankruptcy, rather than wipe out large swaths of debt all at once, you’ll instead make a repayment plan for paying back your creditors a portion of your debt every month. The specific amount will be calculated based on a number of factors, including your income, expenses, and the type of debt. Unlike chapter 7 bankruptcy, which is based on liquidation or selling your assets, chapter 13 bankruptcy is based on reorganization of your assets and debts into a more manageable structure.
If you have further questions about what type of bankruptcy is best for you, we encourage you to reach out to our team at Groff Law Firm, PLLC.