You probably know that there is more than one kind of bankruptcy. Everyone’s debt problems are different, so it makes sense that the U.S. bankruptcy laws and courts offer more than one way of dealing with them.
Chapter 7 bankruptcy vs. Chapter 13 bankruptcy
The two most common types of personal bankruptcy filed by people in the Lebanon area are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Both achieve the same thing: debt relief. But they go about it in different ways. And one form of bankruptcy might be a better fit for yourself and your family.
- Chapter 7 bankruptcy is often called liquidation bankruptcy because it typically involves selling much of your property to help pay off your debt. However, certain assets are exempt, including the equity in your home, which means you might get to keep it. You must pass a means test to qualify for Chapter 7 bankruptcy.
- Chapter 13 bankruptcy is also known as reorganization bankruptcy. Using this method, you negotiate a plan with creditors to repay your debts with court supervision over three or five years. You are not required to sell any of your property under Chapter 13 bankruptcy.
As you can see, each type has its own pluses and minuses. Chapter 7 bankruptcy is a much faster process, typically lasting three to five months. But you may be required to sell most or all of your property. With Chapter 13 bankruptcy, you keep your property, and it is easier to qualify for. But you must keep up payments for several years before the court will discharge your case.
The details of your debt and your family’s needs influence which form of bankruptcy you should pursue. Going over these particulars with a trusted bankruptcy attorney can help you sort out your options.