When you are struggling with burdensome debt, filing bankruptcy is an option for relief. However, before talking to a bankruptcy attorney, consider learning the distinctions between filing a petition under Chapter 7 or Chapter 13. Each has different criteria and a different impact on your finances, as described below.

Chapter 7 Requires a Means Test

A major distinction between Chapter 7 and Chapter 13 bankruptcy is that you must take a means test to qualify for the former, which measures the ratio of your income compared to your debt. Those who are below the threshold qualify, while those above will have to opt for Chapter 13.

Chapter 7 Wipes Out Debts Without Payments

Chapter 7 bankruptcy discharges many of your debts without making payments to creditors. Once your bankruptcy attorney files the petition, you can complete the entire process within 4 months.  Generally you may keep making payments on your house and car so you can keep them. In most Chapter 7 cases you keep the things you own; no one backs up to your door to take your things.

In contrast, in Chapter 13, you submit a payment plan to the court, which it  must approve. After making payments to creditors for three to five years, the court will discharge any remaining debt. However, you are still responsible for certain expenses—including child support payments—in either scenario.

Chapter 13 Saves Your Property

If you are behind on payments for a home, motor vehicle, rental property, or if you own non-exempt assets, filing Chapter 13 lets you catch up on your payments (or keep the non exempt asset). Chapter 13 may permit your attorney to assist you in negotiating payment reductions for their property, called cramdowns, which save money.

At Bristol Law Office of Roswell, NM, experienced and compassionate bankruptcy attorneys explain your options and guide you in sound decision-making. These dedicated lawyers protect their client’s interests, putting their more than 30 years of experience to work. Visit their website to learn more about their practice. To meet with a bankruptcy attorney, call (575) 625-5284.