Long Island residents who are struggling to pay bills and have overwhelming consumer debt may be interested in some information about the types of personal bankruptcy available. Depending on a number of factors, one of the two types of bankruptcy may be appropriate for their particular situation.
An individual will generally choose between a Chapter 7 and a Chapter 13 bankruptcy, depending on their circumstances and financial situation. Chapter 7 requires that the person’s income be below a certain threshold in order to qualify. Alternatively, a Chapter 13 bankruptcy requires that the person’s debts be under a certain amount. In Chapter 7, the person’s debts will be discharged if they surrender certain assets to creditors and the bankruptcy is approved by the court. A Chapter 13 bankruptcy, however, involves a payment plan that can last between three and five years. At the end of this period, a court will approve the discharge of debts.
The two types of bankruptcy differ in how they treat certain assets. With Chapter 13, there are certain limitations on whether or not the debtor can keep their home. These depend on the amount of non-exempt equity in the home or whether it meets a homestead exemption. Chapter 7 has similar provisions but also allows co-ownership with a spouse to save the home in some cases. Except under certain circumstances, a car will be taken by creditors in a Chapter 7 bankruptcy. In Chapter 13, the person will be able to keep their car if they follow through with their payment plan.
Deciding between these two types of bankruptcy can be difficult without the help of an attorney. The attorney may also be able to explore other debt relief options if bankruptcy is not appropriate.