Personal bankruptcy has served as a method for millions of Americans to remove themselves from the burden of excess debt. One of the primary strengths of bankruptcy is its flexibility.
In fact, the two main forms of personal bankruptcy, Chapter 7 and Chapter 13, are specifically designed for different types of individuals. So even if you are not eligible to pass the Chapter 7 means test, you may still be able to take advantage of bankruptcy's debt clearing tools through Chapter 13.
But first, you should get the facts on filing. While Chapter 13 doesn't have a strict means test like Chapter 7, or any means test agreement, you may need to be sure it's a good fit for you. In particular, do you have enough income to make the payments required by a Chapter 13 case?
You can get answers by speaking with a local bankruptcy lawyer. For a free case evaluation with a bankruptcy lawyer near you, complete the form on this page and we'll connect you right away.
Chapter 13 bankruptcy is designed for individuals who have a steady source of income and will be able to make regular payments as part of a court-approved plan.
During the Chapter 13 process, the filer and the courts create a consolidated payment plan, combining, ordering and in many cases reducing the amounts owed. For a few years, the individual makes regular payments to a trustee, who then passes on the payments to the person's creditors.
During this time filers are typically protected by the Automatic Stay, which stops and prevents foreclosure, repossession, wage garnishment and other forms of collection during the bankruptcy process.
This process allows filers to catch up on their debts while maintaining their valuable property. In order to ensure that Chapter 13 bankruptcy is used by people for whom it will be most helpful, some requirements must be met.
Requirements for Chapter 13 include:
If you meet these requirements, you will likely be eligible to file for Chapter 13. If, however, you do not, you may choose instead to pursue Chapter 7 bankruptcy. The relatively quick Chapter 7 process also allows many filers to restart their financial lives.
In contrast to Chapter 13, Chapter 7 bankruptcy is designed for people who have limited assets and are looking to discharge some or all of their unsecured debts.
Through Chapter 7 bankruptcy, you may be able to eliminate debts like medical bills, utility bills, payday loans, and credit card debt.
In order to file for Chapter 7, you must pass the Chapter 7 means test, which compares your income with the average income of other people in your state.
People who file for Chapter 7 commonly:
Whether you file for Chapter 7 or Chapter 13, a local bankruptcy attorney can help you decide which form of bankruptcy is right for you.
To learn more about your eligibility for Chapter 13 or Chapter 7, contact a local bankruptcy lawyer today.