Bankruptcy is an effective solution to overwhelming debt. However, there are many considerations to make before filing, the most important of which is what chapter suits your situation. Individuals petitioning for personal bankruptcy have two options to choose from: Chapter 7 and Chapter 13. It’s not always clear which is right for your specific financial position, but the following guide should help you make an educated decision. 

How to Determine Whether to File Chapter 7 or 13

Chapter 7 

Chapter 7 bankruptcies require the debtor to establish eligibility to file by passing a means test. This process must prove your income isn’t enough to make payments on the debt. Should you qualify, your assets will be classified as either exempt or non-exempt. Any non-exempt property will be sold and the proceeds will be given to creditors. Chapter 7 is typically a good option for people who have mostly unsecured debt, such as credit card bills, medical expenses, and personal loans, as each of these can be fully discharged once a case has been approved. 

Chapter 13 

In a Chapter 13 personal bankruptcy, the goal is to reorganize debt into an affordable payment plan over the course of three to five years. To qualify, you must have a regular source of income and you may not exceed $394,725 in unsecured debt or $1,184,200 in secured debt. Unlike Chapter 7, Chapter 13 bankruptcies don’t require the liquidation of assets. This is generally a good choice if the majority of your debt is secured, which includes student loans, mortgage loans, car loans, and taxes. Once you’ve met the terms of the repayment plan, any remaining balances owed on unsecured debt may be discharged. 

If you have decided a personal bankruptcy is the best way to regain your financial freedom, it’s imperative to retain the services of an attorney. For those living in Redding, CA, Mark Briden Law is the best source for bankruptcy advice and representation. With nearly four decades of experience in this practice area, this attorney will help you determine the correct filing and guide you through the process. Contact his office at (530) 222-1664 for a free consultation over the phone or in person and to inquire about available payment plans. You can also visit him online to learn more.