When you’re struggling with debt and feel overwhelmed, bankruptcy may be the right course of action. Whether you’re single or married, filing  Chapter 7 or Chapter 13 bankruptcy are viable options if you meet the criteria. Depending on your goals and circumstances, this guide may be your key to relief from heavy financial burdens. 

Understanding How Chapter 7 & 13 Bankruptcy Differ

How Do You Qualify for Either?

Generally, people who file Chapter 7 bankruptcy have little or no income and a large amount of unsecured debt, such as medical expenses and credit card bills. To qualify for liquidation under Chapter 7, you must pass a means test to show your debt level is much higher than your income.

If you don’t qualify for Chapter 7, you may file under Chapter 13, which is called a wage earner plan. When applying for Chapter 13 bankruptcy, you must have a reliable income source, such as a job or self-employment, or receive pension, retirement, or disability benefits.  

How Do You Interact With Creditors?

Once you file bankruptcy, interaction with creditors is through your attorney and the bankruptcy trustee the court assigns to your case. You will attend a court hearing, at which creditors can appear and ask questions. In Chapter 13 cases, attorneys usually negotiate cram-downs with creditors, which reduce the balances you owe.

Do Both Instances of Bankruptcy Handle the Same Debts?

Yes, however, they are handled differently. Typically, under Chapter 7, your debts are discharged within six months after filing, and you do not pay creditors. In Chapter 13 bankruptcy, you pay creditors according to a plan you propose, which the court has to approve.

The plan allows you to catch up on debts, such as real estate mortgages or car payments. After you make three to five years of payments, the court discharges any qualifying debt that remains. Most back taxes, child support or alimony cannot be discharged under Chapter 7 or Chapter 13. Under rare circumstances, some student loans may be discharged.  

To find out whether filing bankruptcy is right for you, consult with Harry B. Zornow. Serving clients throughout the Hamilton, OH, area for over 30 years, this experienced attorney offers comprehensive advice and skilled representation in Chapter 7 and Chapter 13 bankruptcy claims. Call (513) 737-9770 or visit his website to schedule a consultation.