Should You File Chapter 7 or Chapter 13 Bankruptcy?

If you are considering filing bankruptcy, this is probably not the happiest time in your life. You are probably worried and unsure of exactly what to do, and which kind of bankruptcy you should file, if any.

It is important that you understand that the bankruptcy laws are federal laws that govern in all 50 states. The subjects in the bankruptcy laws are broken up into ‘chapters’ that deal with all the different kinds of bankruptcies that can be filed.

Every bankruptcy case is different, and this is not intended to be legal advice, but some facts may help you decide which fits your personal situation better, chapter 7 or chapter 13, the two main types of personal bankruptcy.

Chapter 7 Bankruptcy

If you decide to file chapter 7 bankruptcy, your assets are liquidated in order to pay your creditors. It is critically important that you understand that there are some assets that you can protect and cannot be taken away from you! Conversely, there are some debts that can NOT be erased by a bankruptcy filing. This type of filing is usually best for people with few assets and have little or no extra income after paying basic living expenses. The court uses a ‘means’ test, to determine if you qualify for Chapter 7 cases. You must also successfully complete a credit counseling class.

The most important benefit is that when you file Chapter 7, you get a complete discharge of all unsecured debt. Chapter 7 is the most prevalent type of bankruptcy filing, so these cases are disposed of fairly quickly; most are resolved in just a few months. It is illegal for creditors to contact you in any way during the handling of your case or after you have been discharged.

Chapter 13 Bankruptcy

In Chapter 13 bankruptcy filings, your debts must be below a certain level to file this type of bankruptcy. Chapter 13 is often used by people who have significant equity in an asset, like a primary residence that they wish to keep. In Chapter 13, the filer must also complete the credit counseling class, but the big difference is that you must propose a plan to the court of how you plan to pay your creditors.

This plan will provide repayment to your creditors over 3 to 5 years. You make your payment to a court appointed trustee who will distribute the money you pay to the creditors in accordance with the court approved plan. The trustee can also be involved in approving or disapproving any major purchases you may want to make for the time you are under the courts protection.

How We Can Help You

Bankruptcy has a lot to do with your financial health, but our experience is that it effects the filer’s emotional well being as well. Making decisions that have large ramifications when you have a lot of stress and worry can be the worst thing you can do. An experienced bankruptcy attorney can guide you and ensure that you do the right thing, file correctly, and protect your rights and property as your case makes it through the courts. Your attorney will notify all your creditors in writing that you have filed for bankruptcy protection, and that all correspondence regarding your debts is to be sent to your attorney, not you.

If you are contemplating filing for bankruptcy, it is crucial that you contact us today. Don’t wait until lawsuits are filed against you or are notified of a foreclosure proceeding against your property! Please call us today at 510-233-7700 or at our website to schedule a free confidential assessment of your case.

Filing bankruptcy can be one of the most important financial decisions you can make; please don’t go it alone, have an experienced attorney at your side to protect your rights. Let us help you get a fresh start, end the worry and sleepless nights as you rebuild your life. Our number is 510-233-7700.

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