People who find themselves in difficult financial situations may be overwhelmed with the thought that they may not ever be able to pay back the debts they have incurred. When it looks like you have no other options, it may be time to consider bankruptcy. For consumers, many will have to decide between Chapter 7 and Chapter 13 bankruptcy. They are different so it is important to choose the one that best fits your situation.
Chapter 7 bankruptcy allows a person to liquidate their property in order to pay back their debts to the creditors. Debtors who have a monthly income that is higher than the state median will be required to take a means test to determine whether he or she is eligible to file bankruptcy. It is important to note that many assets can be exempt when filing a Chapter 7, so one doesn’t need to liquidate everything they own. Some debts, such as credit card payments, can be discharged, while others, such as student loans, cannot be discharged.
Unlike Chapter 7, Chapter 13 bankruptcy is more of a repayment plan. In fact, it is often called a “wage earner’s plan.” It simply allows those who do have a regular monthly income to pay back their debts to creditors over a period of years.
Chapter 13 can also allow a debtor to hold onto assets that might have to be liquidated under Chapter 7.
If you are facing a bleak financial situation, it may be time to consider filing bankruptcy. For assistance, contact an experienced bankruptcy attorney at Cohn Lifland today.