When it comes time to seek help with a debt burden many consumers are often confused by their options. If you are considering filing for bankruptcy it is important to understand the differences in a Chapter 7 and Chapter 13 filing.
Often thought to be the preferred chapter of bankruptcy, a Chapter 7 bankruptcy can have your debts resolved in a matter of months. Filing for Chapter 7 can eliminate most, if not all, of your unsecured non-priority debts like credit cards and medical bills. There are some limitations with a Chapter 7 filing such as eligibility requirements, debt restrictions and the liquidation of assets.
In order to qualify for a Chapter 7 filing you must pass a means test, which evaluates your income against the median income of the state. Incomes above this threshold are typically not eligible for a Chapter 7, but can file Chapter 13 instead. One of the benefits of a Chapter 13 case is its ability to serve, not only a bigger bracket of consumers, is the wider range of debts that can be included. Secured and priority debts are more likely to be eligible in a Chapter 13 case than a Chapter 7. Mortgages and car loans cannot be discharged in a Chapter 7 case unless they are reaffirmed with the lender. Priority debts like taxes and back due domestic support payments are also not eligible for a Chapter 7 filing, but may be included in a Chapter 13 case.
Since each person’s financial situation is unique, it is best to review your Chapter 7 or Chapter 13 options with a Dallas bankruptcy lawyer to ensure you chose the best option for your needs.