Which Type of Bankruptcy Should I File?
Deciding to declare bankruptcy is a difficult decision and one not to be taken lightly. You need to remember that bankruptcy has the potential to affect your reputation, self-image, and future credit. However, it can also significantly improve your quality of life as communications from creditors begin to dwindle down, allow you to keep a business operational, and help to ensure that your financial situation becomes manageable once again. It is for these reasons that you may benefit from speaking with an experienced bankruptcy lawyer.
Chapter 7 bankruptcy is commonly known as liquidation bankruptcy. Typically, in this category of bankruptcy, all of your debts are discharged, with certain exceptions of course. Any non-exempt assets that you own will be sold to satisfy debts of your creditors.
It is important to note that there are alternatives to Chapter 7 bankruptcy, such as Chapter 11 or Chapter 13. If you are a business owner, you might want to consider filing for bankruptcy under Chapter 13, so that you can continue your business and avoid liquidation. A bankruptcy lawyer can help you to explore the potential benefits of this option.
Advantages of Chapter 7 Bankruptcy
There are many reasons why Chapter 7 may be better for your situation than filing Chapter 13. Chapter 7 cases are resolved much faster than Chapter 13, and you will usually be able to keep most of your property. You can also avoid paying the bank a portion of your debt. Nevertheless, not everyone will qualify for Chapter 7 bankruptcy. If you have a sufficient amount of income that is subject to a repayment plan under Chapter 13, you will not generally be considered eligible for a Chapter 7 filing.
Situations When Chapter 13 May Be More Favorable to Chapter 7
Even if you are eligible to file for Chapter 7, you should consider filing for Chapter 13 when:
- You missed payments on your home mortgage or car loan, as you might be able to reinstate the original agreement
- You have student loans, tax debt or other debt obligations that will not be discharged in Chapter 7. Instead, they will be considered part of the Chapter 13 plan and can extend the time for repayment
- You would like to pay off your debts, but need the assistance and security of the bankruptcy court
- You have non-exempt property that you want to keep
- You asked someone to become a co-debtor on your personal debt and want to prevent creditors from going after the co-debtor
Contact a Bankruptcy Law Firm Today
Deciding when to file for bankruptcy is a hard-enough question alone, but it soon becomes more complicated when determining what type of bankruptcy for which to file. Both Chapter 7 and Chapter 13 bankruptcies offer pros and cons, based on the unique circumstances surrounding any individual’s situation.