Is Chapter 7 Or Chapter 13 The Right Option?

Which bankruptcy is right for you? If you are an individual or married couple filing bankruptcy, you will most likely be choosing between filing Chapter 7 and Chapter 13 bankruptcy. Both bankruptcies have their advantages. The right bankruptcy for you will depend in part on your income and in part on your individual financial situation. A skilled bankruptcy attorney can advise you on the best bankruptcy for you.

At Mathis, Bates & Klinghard PLLC, we pride ourselves on being accessible to our clients. We guide our clients through the bankruptcy process, letting them know what to expect and helping them avoid costly mistakes that many people make when trying to file without an attorney. Based in Clarksville, we represent clients throughout Tennessee and western Kentucky.

The best way to choose what chapter will work best for you is to compare Chapter 7 vs. Chapter 13 bankruptcy.

Understanding How Chapter 7 Bankruptcy Works

The vast majority of people want to pursue bankruptcy because they are eager to complete bankruptcy quickly. Sometimes referred to as liquidation, this form of bankruptcy wipes away liability for unsecured debts such as medical debt, credit card debt and most unsecured loans.

Generally it takes approximately 90 days from the date of filing to receive a discharge. While this form of bankruptcy wipes away most debts, certain debts, such as home mortgages and auto loans, may be kept through the bankruptcy.

To be eligible for Chapter 7 bankruptcy, you must be able to pass the Means Test. The Means Test is a measurement of income for an average household of your size in your county. Your household income cannot exceed this number to qualify for Chapter 7 bankruptcy.

Understanding How Chapter 13 Bankruptcy Works

Chapter 13 bankruptcy is sometimes referred to as reorganization. It involves setting up a payment plan with the bankruptcy court to pay back either a portion of your debt or all your debt over a period of years. At the end of that time, whatever unsecured debt remains is discharged, just like a Chapter 7 bankruptcy.

Unlike Chapter 7, passing the Means Test is not necessary to qualify for Chapter 13 bankruptcy, but it will determine how long a plan will last. Generally, individuals who pass the Means Test may complete the plan in 36 months; individuals whose income exceeds the Means Test are required to participate in a 60-month plan.

Chapter 13 bankruptcy offers the following benefits that are unavailable in a Chapter 7 bankruptcy:

  • Catch up on debt — Individuals who have fallen behind on house or car payments may file a Chapter 13 bankruptcy to get caught up on arrears while avoiding foreclosure or repossession.
  • Pay off nondischargeable debt — Certain debts are nondischargeable in a bankruptcy. Business tax debt and some individual income tax debt may be nondischargeable in bankruptcy. Chapter 13 plans enable individuals to pay off this debt without fear of garnishment.
  • Reorganize debt — People can reorganize their debt to get on firm ground again. Certain secured debts may be paid back at a lower interest rate, enabling individuals to make ends meet.

Talk to a lawyer to understand what a Chapter 13 plan might look like for you. Your plan payment will depend on a number of factors including your income, what debts must be paid off within the plan and your overall debt.

Advantages Of Chapter 7 And Chapter 13 Bankruptcy: The Automatic Stay

Whether you pursue a Chapter 7 or Chapter 13 bankruptcy, you will enjoy the benefit of court protection from creditors. The Automatic Stay is a legal injunction that goes into effect the moment your case is filed. Creditors are prohibited from attempting to collect a debt while the Automatic Stay is in effect. This includes garnishment, repossession or foreclosure.

Which Chapter Bankruptcy Is Right For You?

If you have additional questions about Chapter 7 or Chapter 13 bankruptcy and are wondering which one is right for you, you should consult with a bankruptcy attorney. A bankruptcy attorney can evaluate your individual situation, goals and objectives and advise you how to proceed.

We invite you to call our office for a free confidential consultation with one of our friendly attorneys. There is no obligation when you meet with us. Our goal is to give you the tools you need to make a decision about your future. Clients can count on us to provide an open, nonjudgmental environment.

If you are feeling overwhelmed by the stress of your debt, help is just a phone call away. Call Mathis, Bates & Klinghard PLLC at 931-444-3153. You can also email using our online contact form.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.