Which Bankruptcy Chapter Should I File?

Most individuals file Chapter 7 or Chapter 13 bankruptcy. The chapter you choose will depend on your particular needs and financial qualifications.

Chapter 7 bankruptcy quickly discharges (wipes out) certain types of debt, such as credit card balances, medical bills, and personal loans. Although you won’t need to pay into a repayment plan, you might have to give up some of your property. Also, Chapter 7 bankruptcy doesn’t help you keep a house or car if you’re behind on payments. To qualify, your income must be low enough to pass the “means test.”

Chapter 13 bankruptcy is a better choice if you need to bring your house or car loan current, or pay off nondischargeable debt, such as child or spousal support, or past-due income tax. Although you can keep all of your property, you must have enough income to fund a three- to five-year repayment plan. Additionally, your total debt cannot exceed maximum limits ($1,184,200 for secured debt, such as vehicle and real estate loans; $394,725 for unsecured debt, such as credit card and utility bills). Finally, keeping property comes at a cost—you must pay for nonexempt (property you aren’t entitled to keep) in the repayment plan.

Not only are the facts of your individual case unique, correctly applying bankruptcy law can be tricky. If you’re not sure which chapter best meets your needs, you should consult with a bankruptcy lawyer.

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