Knowing whether or not filing for bankruptcy is the right choice for you can be challenging. Although bankruptcy can help certain individuals get out of debt, it isn’t helpful for everyone. Depending on the kinds of debt you’re dealing with, bankruptcy may not be able to help you.
There are two main kinds of bankruptcy you may be considering – Chapter 7 and Chapter 13.
Let’s take a look at what each entails, and how to know if one is right for you.
What is Chapter 7 Bankruptcy?
When you file for Chapter 7 bankruptcy, you’re able to discharge certain debts, giving you a fresh start. By liquidating certain assets, you can get the cash you need to pay off as much debt as possible. Once those debts are paid, the rest is forgiven.
There is no minimum debt for Chapter 7 bankruptcy. However, non-exempt property will be sold to cover the costs of your debt. You also will not be able to file Chapter 7 bankruptcy for another eight years.
What is Chapter 13 Bankruptcy?
Unlike Chapter 7, Chapter 13 does not forgive you for your debts immediately. However, you also won’t be required to liquidate your property and assets. When you file for Chapter 13 bankruptcy, you will need tocreate a payment plan to work off paying your debts. Once the duration of your payment plan is up, the rest of your debt will be forgiven.
During your payment plan, your income and assets will be automatically assigned to your creditors. This means that during the payment plan period, you won’t have the freedom to choose where your money goes. Typical payment plans last between three and five years. However, you can file Chapter 13 bankruptcy repeatedly if necessary.
Which Bankruptcy is Right for Me?
If you’re unsure which kind of bankruptcy best fits your needs, the bankruptcy attorneys at Michael F. Kanzer & Associates can help you make an educated decision. With experience helping individuals in the Brooklyn area work through their bankruptcy filings, we can help you better understand what Chapter 7 and Chapter 13 bankruptcy entails and help you get out of debt in the most efficient way possible.