While it may be possible to logically assume that your financial stability is going to be strong or weak according to various circumstances in your life, you can never predict with 100 percent certainty what lies in store for your financial future. Life takes twists and turns, sometimes quite suddenly and unexpectedly. If a situation arises that throws you for a loop regarding expenses, your budget and ability to pay back debt, it might be more challenging than you think to get things back on track.
Filing for bankruptcy is often a viable option when financial situations get out of hand and you have no foreseeable means for satisfying the debts you owe. In fact, certain types of bankruptcy can stop the foreclosure process, which means you might be able to save your home by tapping into debt relief resources that are available in New York. You, of course, must first determine if you are eligible. To do that, you have to have a good understanding of Chapter 7 and Chapter 13 bankruptcies.
A few key differences
It’s quite possible that you might qualify for one type of bankruptcy but not another; therefore, if you look into Chapter 7, for instance, and learn that you’re not eligible, it doesn’t rule out the possibility that Chapter 13 might be a valid option. That’s why it’s important to thoroughly resource both types of bankruptcy before choosing a course of action. The following list shows the main differences between Chapter 7 and Chapter 13:
- Chapter 7 eligibility is based on your income, in particular whether you earn the same or less than the average income earned in your state. If you earn more than the median state income, you are not eligible to file for this type of bankruptcy.
- Debt relief counselors often refer to Chapter 7 as a complete liquidation process. All your assets convert to their cash values and then go as payments to your creditors.
- Certain types of debt are not dischargeable through Chapter 7 bankruptcy. An example of this would be child support or a legal claim you must pay.
- Chapter 13 bankruptcy is often available to those who do not meet the means test qualifications for Chapter 7.
- Chapter 13 is more of a restructured payment plan rather than full liquidation of assets.
- If your creditors agree, new schedules will allow you to keep your assets while you continue to make payments to satisfy your debt.
- You must have a reliable income to qualify for Chapter 13, and it has to be enough to cover your debts over the set period of time upon which you and your creditors agree.
Money problems can be unsettling for sure, but they needn’t leave you feeling hopeless or helpless, for that matter. Such situations are often temporary, and finding a swift and adequate solution often lies in knowing what support resources are available and how to quickly access them.