The COVID-19 crisis has left a multitude of people without income. Many of them are considering filing for bankruptcy, a process that lets you eliminate or reorganize your debts. While bankruptcy can bring great relief in times of crisis, many people find bankruptcy law to be complicated. The majority of people will have two options when filing for bankruptcy during a crisis. These options are either Chapter 7 or Chapter 13 bankruptcy. If you’re thinking about filing but don’t know what your options are, learn about the laws involved below. 

Chapter 7 

Chapter 7 bankruptcy allows you to eliminate all or most of your debts. A court-appointed trustee will sell most of your assets to pay off your debts as much as possible. Your remaining unsecured debts, which are debts that aren’t backed by collateral, such as medical bills, utility bills, and credit card balances, will be eliminated. That means you’ll no longer need to pay them.

Note that some of your assets may not be sold. These items are called “exempt assets.” Exempt assets may include necessary clothing, furnishings, household goods, and appliances. They may also include pensions, public benefits like social security, welfare, and unemployment compensation accumulated in a bank account. Motor vehicles up to a certain value can also be considered. 

In order to qualify for Chapter 7 bankruptcy, your income must be lower than your state’s median income for households with the same number of dependents you have. If your income is higher than that median, you may still qualify for Chapter 7 bankruptcy if deducting mortgage payments, taxes, and other expenses from your income bring it under the median. People who don’t qualify for Chapter 7 bankruptcy can reapply in six months or consider Chapter 13 bankruptcy. 

Chapter 13

Chapter 13 bankruptcy allows you to reorganize your debts so you can make monthly payments on them over a period of three to five years. A trustee will ensure your debts are paid in that timeframe. If you abide by the repayment plan, you’ll get to keep your assets. However, you should be confident that you can pay off your debts within three to five years. In times of crisis, having this confidence can be difficult, so think carefully before deciding on Chapter 13.

No matter what type of bankruptcy you file for, the process will likely be challenging. Simplify it with the help of Donna C. Crooks Attorney At Law. Based in Daleville, AL, this trusted attorney has been serving Southeast Alabama for over 25 years. With a robust understanding of bankruptcy law, she’ll help you choose the right option based on your needs and guide you through the entire filing process. Learn more about her services online and call (334) 598-9534 to schedule a free consultation.