If your business or personal financial situation feels overwhelming, options for relief are available. Filing for Chapter 13 or Chapter 7 bankruptcy might be your best choice to address long-term debt. Here’s what you should know about these two common methods of federal debt protection.

Chapter 7

Known as straight bankruptcy or liquidation, Chapter 7 bankruptcy gives individuals, married couples, and business owners a fresh start quickly. Most cases end with a discharge that wipes out qualified debts in about four to six months after filing a petition. You do not make payments to creditors and can claim exemptions to protect assets including pension and retirement accounts, clothing, jewelry, and low-value vehicles.

You must take a means test to determine whether you qualify and complete a debt counseling class before you file. Those with large amounts of unsecured debts from medical services, credit cards, and signature loans in combination with having a low income tend to be good candidates.

Chapter 13

Chapter 13 bankruptcy is an alternative for people who do not qualify for or do not want to file straight bankruptcy. Often called a wage earner plan, Chapter 13 lets you keep valuable non-exempt property, such as real estate and motor vehicles.

If you have a reliable source of income, you can catch up on past-due amounts by submitting a payment plan for court approval. It is possible to negotiate lower balances, a process called cramdown. Creditors receive plan payments over three to five years and the court discharges any debts you have left when the plan ends.  

Deciding whether to file Chapter 13 or Chapter 7 bankruptcy involves numerous considerations. The experienced bankruptcy attorneys at Sam Turco Law Offices offer advice based on each client’s circumstances. Since 1992, these skilled lawyers have represented residents throughout Omaha, Lincoln, and the state of Nebraska, guiding them through the bankruptcy process successfully. Visit their website for more information on their services and call (402) 614-7171 to schedule a free consultation.