Most people who are in debt never expect to find themselves there. In many cases, a combination of factors beyond a person’s control is responsible for large amounts of debt: a job loss, a divorce, or a medical emergency. For these people, filing for personal bankruptcy might be the best way for them to regain their financial footing.
Doing so, however, isn’t exactly a straightforward proposition. Depending on an individual’s financial situation, it might not be clear which might be a better choice, Chapter 7 or Chapter 13 bankruptcy. An experienced bankruptcy attorney can help to lay out the differences in detail, but there are a few key things that are important to understand.
The two types of filing do have things in common, but it’s the differences that are important to recognize. By filing Chapter 13 bankruptcy, for example, an impeding home foreclosure can be stopped. This is not true under Chapter 7 bankruptcy. For people whose primary concern is saving their home, Chapter 7 may not be appropriate.
There are also certain income restrictions associated with Chapter 7 bankruptcy. If an individual’s income is too high, then Chapter 13 may be the best way to go. Under Chapter 13 bankruptcy, debts are repaid partially or fully over a 3-to-5-year timeframe. Chapter 13 bankruptcy also allows for repaying debts that can’t be wiped away by Chapter 7 bankruptcy, such as income tax debt.
In any case, it is better to act sooner rather than later when it comes to finding out about bankruptcy options.
Source: For more information about personal bankruptcy, please visit our New York bankrutpcy page.