Chapter 7 or Chapter 13: What are the differences?
Individuals who seek help at our Bryan bankruptcy law firm will need to decide whether to file under Chapter 7 or Chapter 13. Most clients choose Chapter 7 because it is a simpler and faster process than Chapter 13. However, some clients will not be eligible for Chapter 7 and others, though eligible, may find that Chapter 13 is a better option for them. As experienced Chapter 7 bankruptcy lawyers, we will assess your situation and advise you on which Chapter you qualify for and which will best serve your needs.
Chapter 7 Bankruptcy
Chapter 7 is a good choice for individuals who have unsecured, dischargeable debts like credit card debt and medical bills, and little non-exempt property. In a Chapter 7 bankruptcy, the bankruptcy trustee will sell any non-exempt property you may own to repay your creditors. You will be able to keep your exempt assets. Which assets are exempt is determined by state and federal law. Typically, debtors are able to keep such items as clothing, household furnishings, a car, and tools and equipment used in a trade or profession. Your Bryan Chapter 7 bankruptcy attorney will review with you which of your assets are exempt and which may be sold by the trustee. The good news is that many people who are eligible to file for Chapter 7 bankruptcy have no non-exempt assets and are able to keep all of their property.
If most of your debts are consumer debts, you must pass a means test to file under Chapter 7. The purpose of the means test is to determine whether you have sufficient income to repay at least a portion of your debts. The calculation is complicated, but your Bryan bankruptcy attorney will assist you. You will pass the means test if (a) your average annual income is equal to or less than the median income for households your size in your state; or (b) you don't have enough disposable income (after deductions for living expenses) to repay at least a minimum specified amount of your debt over five years.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is available if you do not pass the means test. Even if you pass the means test, Chapter 13 may be a good option if you have non-exempt assts you want to keep or you are behind on your mortgage or car loan and you want to catch up and avoid foreclosure or repossession. In a Chapter 13 bankruptcy you will create a plan to repay all or a portion of your debts over the course of three or five years. You will then make monthly payments to the Chapter 13 bankruptcy trustee for the duration of your plan.
To be eligible for Chapter 13 bankruptcy, you must have regular and reliable income for at least six months prior to filing for bankruptcy.
Filing for bankruptcy is a complicated legal process that has long-term consequences. Therefore, if you are considering filing for bankruptcy, contact the Chapter 7 bankruptcy lawyers at the Peterson Law Group to discuss your options.