Which Bankruptcy Chapter Is Right For Me?
Deciding which bankruptcy chapter is right for you can be difficult. First, you should consult with a bankruptcy lawyer to help you determine whether you are eligible for Chapter 7 bankruptcy or Chapter 13 bankruptcy. This post will provide you with some of the considerations that go into which bankruptcy Chapter may be right for you.
If you have previously filed a bankruptcy case and received a discharge, your options may be limited. The chart below shows you how long you have to wait before filing a bankruptcy again depending on which Chapter you filed for previously and which Chapter you want to file for now.
If your previous bankruptcy case was dismissed, you should contact an experienced bankruptcy attorney to discuss additional limitations and motions you will be required to file with the bankruptcy court.
To make the final determination of which bankruptcy Chapter is best suited for your individual needs, you will need to examine three areas: (1) the assets; (2) income and expenses (i.e., your household budget, excluding your credit card payments and other non-household expenses); and, (3) calculation of the median income test, and if applicable, means test.
The majority of Chapter 7 cases involve no asset cases, meaning the trustee cannot seize and liquidate any of the debtor's belongings because they are either protected under state or federal law, or have no equity after deducting the balance owed to the lienholder or creditor. If, however, you do have equity in your assets that the Chapter 7 trustee could liquidate, you will need to be prepared to surrender the asset, or file Chapter 13 bankruptcy instead.
To qualify for Chapter 7 discharge, you must have no income remaining after paying your household expenses (i.e., rent/mortgage, utilities, groceries, medicine, gas, car insurance, etc. . .). If you have additional income, then you will be required to file a Chapter 13 bankruptcy. In addition, you must be considered below median income for a household of your family's size.
Both Chapter 7 and Chapter 13 bankruptcy can stop the following:
Warrants in Debt hearings (Warning: If you have real estate and your creditor has already obtained a judgment, the creditor can attach that judgment to your home without further notice to you. Discuss this issue with your bankruptcy lawyer.)
Harassing collection calls and letters
Utility cut-off notices
You may want to consider filing for bankruptcy relief under Chapter 13 if any of the following issues apply to you:
Pending Foreclosure Sale
Upside down on vehicle loan and vehicle was purchased more than 2 1/2 years ago
Interest rate on vehicle loan is higher than 5%
If any of these circumstances apply to you, then you may want to consider filing a Chapter 13 bankruptcy case. You may also be required to file Chapter 13 if:
You are above median income under the means test
Your assets can be liquidated in a Chapter 7 bankruptcy
You have too much disposable income
These are some of the many considerations that go into the decision over which bankruptcy Chapter is right for you. To make an informed decision about bankruptcy and your financial future, consult with an experienced bankruptcy lawyer near you.