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Should You File For Bankruptcy?
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Chapter 13 (Reorganization)
Chapter 13 bankruptcy, also known as “reorganization” bankruptcy, allows individuals with a regular income to develop a repayment plan to pay off all or part of their debts over three to five years. There are limits on the amount of secured and unsecured debt one can have. Chapter 13 is suitable for those who want to keep their assets and can afford to make monthly payments.
Strategies
- Reorganize debts into a manageable repayment plan
- Keep assets while catching up on missed payments
- Provide debt relief for individuals with regular income
Solutions
- Develop a 3-5 year repayment plan
- File bankruptcy petition and proposed repayment plan
- Make regular payments to the trustee
- Complete required credit counseling and financial management courses
Results
- Discharge of remaining eligible debts after completing the repayment plan
- Protection from foreclosure and repossession
- Bankruptcy remains on credit report for 7 years
Chapter 7 (Liquidation)
Chapter 7 bankruptcy, also known as “liquidation” bankruptcy, involves the sale of a debtor’s non-exempt assets to pay off creditors. It is typically chosen by individuals with little to no regular income and substantial unsecured debt (e.g., credit card debt, medical bills). A means test is required to qualify, if your income is too high, you may not qualify for Chapter 7.
Strategies
- Liquidate non-exempt assets to pay off creditors
- Quickly eliminate most unsecured debts
- Provide a "fresh start" for individuals or businesses unable to repay debts
Solutions
- File a bankruptcy petition and required financial documents
- Pass the means test to qualify
- Complete pre-filing credit counseling and post-filing financial management courses
Results
- Discharge of most unsecured debts within 4-6 months
- Immediate relief from collection actions due to automatic stay
- Potential loss of non-exempt property
- Bankruptcy remains on credit report for 10 years
