Chapter 7 vs. Chapter 13 Bankruptcy
If you are struggling with medical bills, credit card debt, car payments, or other forms of debt, you might wonder whether bankruptcy is the right option for you. Bankruptcy helps thousands of Americans get out from under debt every year, starting them on the path toward financial recovery and freedom. There are different forms of bankruptcy, each available to different individuals depending on their circumstances and each with their own pros and cons. Learn below about the two most common forms of bankruptcy for individuals: Chapter 7 and Chapter 13. Call an experienced Houston debt relief and consumer bankruptcy attorney to discuss your options for a brighter financial future.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is available for individuals with limited income who are burdened with credit card bills, medical bills, and other forms of unsecured debt (meaning debt that is not attached to collateral, such as a mortgage, which is debt secured by a house). The debtor’s nonexempt property may be sold to repay as much of the unsecured debt as possible, and the remaining unsecured debt will be discharged. Although Chapter 7 theoretically involves the sale of assets, debtors can take advantage of a variety of exemptions under state or federal law. Most debtors, with the help of an experienced debt relief attorney, are able to keep most, if not all, of their assets in a Chapter 7 bankruptcy.
Chapter 7 bankruptcy is available to individuals who pass a “means test.” Individuals qualify either if their average monthly income is below the state median income, or if their income is above the median but is sufficiently offset by their regular expenses. Your bankruptcy attorney will help you apply the means test calculation to your income in order to give you the strongest chance for qualifying for Chapter 7 bankruptcy and will help you protect your assets from sale.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as reorganization bankruptcy, is available for individuals saddled with debt but who have regular income and can afford to make payments for the foreseeable future. The debtor will work with a trustee, the court, and their creditors to put together a repayment plan. The repayment plan will typically last three or five years and will cover as much of the debt as reasonable. At the end of the repayment plan period, any covered unsecured debt that remains will be discharged. The debtor’s property will not be sold as part of the repayment plan.
Chapter 13 bankruptcy essentially gives debtors some breathing room, reducing their monthly payments to something more affordable and allowing them to get back to financial soundness over time. The total obligation will likely be reduced, more time for repayment will be granted, and collection efforts will be delayed.
Chapter 13 eligibility depends on a variety of factors, including the debtor’s income and the amount and type of debt they face. Speak with a knowledgeable bankruptcy lawyer about your financial circumstances to evaluate which form of bankruptcy may be right for you.
If you are struggling with consumer debt, speak with a serious, qualified, and effective Texas consumer bankruptcy and debt relief attorney at the Houston Law Office of Maria S. Lowry by calling 713-850-8859 today.