Most Nashville families that are struggling with debt and are thinking about filing for bankruptcy have two options: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Both forms of personal bankruptcy protection help you pay off your debts and regain control over your household finances. But they work differently, and one might be a much better fit for your family than the other. Here is a brief comparison of Chapter 7 versus Chapter 13 bankruptcy.
Chapter 7 bankruptcy
Known as “liquidation bankruptcy,” Chapter 7 bankruptcy discharges most of your debts. In exchange, you will have to give up most of your property to pay off creditors. However, you can exempt a certain amount of property to help you make a fresh start once you are finished with bankruptcy. Chapter 7 bankruptcy can be a relatively quick process, taking as little as three months to complete. But you must pass a “means test” to qualify, which basically proves that your income is too low to make Chapter 13 bankruptcy possible.
Chapter 13 bankruptcy
As opposed to liquidation bankruptcy, under Chapter 13, you work out a plan to reorganize and repay your debts in monthly installments. The repayment plan will usually last three to five years and requires you to make a payment every month. A big advantage of Chapter 13 bankruptcy over Chapter 7 is that you get to keep your property. However, you may also have to undergo credit counseling at your own expense.
Also, not everyone qualifies for Chapter 13 bankruptcy. It tends to be an option for people with regular income and debts that, while large, are relatively manageable.
For more detailed advice about whether Chapter 7 or Chapter bankruptcy makes more sense for your particular needs, talk to an experienced bankruptcy attorney.