When it comes to bankruptcy law, there are two main types of consumer bankruptcy you can file: Chapter 7 and Chapter 13. If you are overwhelmed by debt and interested in filing for bankruptcy, it is essential that you understand that main differences between these two types of bankruptcy before you do anything else.
Chapter 7 Bankruptcy
Under bankruptcy law, Chapter 7 bankruptcy is a debt relief solution designed to eliminate your unsecured debts. In order to qualify for this type of bankruptcy, you must have little to no disposable income.
If you decide to file for this type of bankruptcy, a trustee will handle your case and use your nonexempt assets to repay your creditors. Any of your assets that are considered exempt are not subject to being sold.
Chapter 13 Bankruptcy
If you have a regular income and can afford to pay back at least a portion of your debts, Chapter 13 bankruptcy may be for you. When you file for this type of bankruptcy, none of your assets are sold to your creditors. In exchange, a repayment plan will be created, and you will have to stick to it for anywhere from three to five years. After this time period passes, your debts will be discharged.
If you aren’t familiar with bankruptcy law, it can be difficult to decide if you are eligible to file for Chapter 7 or Chapter 13 bankruptcy. For this reason, it is best to consult with one of our attorneys at Northpointe Law Group before making the final decision to file.