You have found yourself in a financial bind, and you can’t see how it’s going to get better. You made some bad decisions, and now your hours have been cut back at work, too.
You were already living paycheck to paycheck, and you can’t justify cutting back in any area of your life. You already coupon for lower grocery costs, share rides with coworkers and live in a cheap rental.
What are your options? Should you pursue a Chapter 7 bankruptcy, or does a Chapter 13 bankruptcy make more sense?
If you have additional questions, please don’t hesitate to contact an experienced Waco bankruptcy attorney today.
What is the Difference Between Chapter 7 and Chapter 13 Bankruptcy
A Chapter 7 bankruptcy is also known as liquidation bankruptcy. It has many exemptions, but you essentially sell items or liquidate assets to pay back as much as possible to creditors. Then, once the bankruptcy is complete, the court dismisses any extraneous, unsecured debts. A Chapter 7 bankruptcy can significantly impact your credit rating.
In order to qualify for a Chapter 7 bankruptcy, an individual must qualify for this bankruptcy type via a means test. The means test considers a debtor’s income and assets, expenses, and family size in order to determine whether or not the debtor has enough disposable income to repay their debts. If a person’s income is above the state’s median income, they will be confined to Chapter 13 bankruptcy and will not be eligible for liquidation bankruptcy.
In the case that you don’t qualify for a Chapter 7 bankruptcy, a Chapter 13 bankruptcy may work for you. If you have some income to repay the debts, then a Chapter 13 bankruptcy might be a good option. With this plan, you pay back a portion of your debts over the course of three to five years.
A bankruptcy trustee receives your payments to distribute those payments to your creditors, so you don’t have to talk to them directly. If you choose this route, you need to have enough income to pay your secured debts and priority debts in full by the end of the three-to-five-year plan, unless you have an agreement for debts to continue beyond that point.
While some people may prefer a Chapter 7 bankruptcy vs. Chapter 13 bankruptcy based on the fact that with a Chapter 13 they are asked to repay debts, a Chapter 13 actually has many advantages over a Chapter 7 for those who can afford it. One of the biggest advantages, for example, is that Chapter 13 can help a debtor avoid foreclosure. Another benefit is that a Chapter 13 bankruptcy will show up on a debtor’s credit report for fewer years than will a Chapter 7 bankruptcy.
Are All Debts Discharged in Bankruptcy?
Keep in mind that whether you file for Chapter 7 or Chapter 13 bankruptcy, the two bankruptcy types have some similarities, including the fact that regardless of the type you file, there are certain debts that you cannot discharge. Debts that are not dischargeable in bankruptcy include student loan debts, child support debt, alimony debt, condominium or homeowners’ association fees, and income tax debts. (Some of these debts actually can be discharged, but doing so requires special permission and is uncommon.)
Contact an Experienced Waco, TX Bankruptcy Lawyer to Learn More
These are just two bankruptcy options. If you feel you are unable to pay your debts, our attorney at Simer & Tetens can meet with you. We can review your best course of action.
Source: FindLaw, “Chapter 13 vs. Chapter 7 Bankruptcy