If you are struggling to pay off your debt and considering filing bankruptcy to get rid of annoying collection calls, you should first understand the differences between various types of bankruptcy chapters. There are two primary bankruptcy options for the relief of personal debt – Chapter 7 and Chapter 13.
There are several significant differences between Chapter 7 and Chapter 13, from the filing process and eligibility requirements to the handling of your debt and assets. Knowing these differences is essential to start your new financial life in the best possible way.
Who can file for bankruptcy?
Chapter 7 – Both individuals and business entities can file for a chapter 7 bankruptcy if they meet the eligibility requirements. In order to meet the criteria for a chapter 7 bankruptcy, your income must be less than the state median and you should have little or no surplus income after paying your monthly expenses.
Chapter 13 – It can only be filed by individuals and sole proprietors. The eligibility for filing a chapter 13 bankruptcy depends on the amount of your debt. One should not have more than around $1.1 million of secured debt and around $0.4 million of unsecured debt.
Which bankruptcy chapter is right for you?
Chapter 7 – If you have no money left after paying your monthly expenditures and you own little property except for the basic necessities, you can file for a bankruptcy under chapter 7.
Chapter 13 – If you have a regular source of income to pay your living expenses, but you are unable to make regular payments to your creditors, you may file for a chapter 13 bankruptcy.
What are the benefits of filing a bankruptcy?
Chapter 7 – There are numerous benefits. Your debts are discharged quickly, most typically within three to five months. Also, once you have filed for a chapter 7 bankruptcy, your creditors can no longer make collection attempts.
Chapter 13 – You get a protection period during which you creditors cannot contact you directly. The applicant is required to make only one monthly payment to the trustee for distribution. This chapter gives you the freedom to keep most of your property and gives you enough time to catch up on your delinquent accounts.
If you have questions regarding bankruptcy or want to choose the right bankruptcy chapter according to your specific circumstances, we would love to hear from you. Call us at 1-800-884-9600 for a free appointment or click here for a free bankruptcy case evaluation.