If you’re in over your head financially, declaring bankruptcy may be the answer. While deciding to file may be easy, determining whether you should file for Chapter 7 or Chapter 13 might pose a challenge. Fortunately, asking yourself the following questions will help you decide which avenue to take.

4 Questions to Ask When Deciding Between Chapter 7 & Chapter 13 Bankruptcy

Do I earn too much to file for Chapter 7?

To declare Chapter 7 bankruptcy, your income must not exceed the state’s median for a household of the same size. If it does, you will have to pass an additional means test before you are eligible to file. Kentucky’s median income for a single individual is roughly $40,000 and increases by several thousand for each additional member of the household.

Am I filing as an individual or a business?

Chapter 13 bankruptcy is only available to individuals. If you are filing as a business entity, you will have to choose between Chapter 7 and Chapter 11. Chapter 11 is similar to Chapter 13 but does not impose the same limitations. For example, there are no minimum or maximum income or debt requirements for those who wish to file Chapter 11.

Do I want to retain all assets?

If you’re determined to keep all your property, Chapter 13 is the best approach. During Chapter 7 bankruptcy, nonexempt assets like luxury vehicles, jewelry, artwork, and second homes can be liquidated to pay back creditors. With Chapter 13, on the other hand, debtors get to retain their property by reorganizing their debt and devising a more manageable three- to five-year repayment plan.

Can I handle a lengthy repayment plan?

Do you have enough disposable income to cover the repayment obligations that come with declaring Chapter 13? Although Chapter 13 will discharge applicable debts that remain after the payment plan has ended, you must make regular payments until that time. 

For seasoned guidance during bankruptcy proceedings, turn to The Curt Davis Law Office in Somerset, KY. Led by Curt Davis, who has more than three decades of experience, this firm is proud to help clients regain their financial footing. Serving individuals throughout McCreary, Pulaski, and Wayne counties, they also assist with personal injury suits, wrongful death cases, estate planning, and workers’ compensation claims. To talk to a bankruptcy attorney on their team about your situation, call (606) 678-2525 or reach out online.