If you have confidently reached the conclusion that filing for Bankruptcy, you are really only halfway done with that decision, as you still need to decide if you want to file for Chapter 7 or Chapter 13. Both provide valuable Debt relief but each functions noticeably different from the other. If you want to know that your bankruptcy will work and is right for your end goal, you need to understand each type available to you.

Chapter 7 for Unpayable Debt

If your debt is so cumbersome and great that you know you will never be able to pay it off, you are probably going to want Chapter 7 bankruptcy. This form of bankruptcy typically erases the majority, if not all, of an individual’s debt, whether it is secured or unsecured. However, in exchange for the elimination of so much debt, creditors may be able to stake a claim on Collateral Property, such as homes, automobiles, heirlooms, savings account, etc. People using Chapter 7 bankruptcy should be prepared to lose at least a little bit of their personal property, as it is quite rare to be able to keep everything.

Furthermore, Chapter 7 bankruptcy’s power to do away with debt entirely is only provided to those who really need it. Before you can file, you need to qualify for it by passing the means test. In relatively simplified terms, the means test is an examination of your average monthly income compared to the average of others in your state and income bracket. If you make more than the average person, you cannot file for Chapter 7.

Chapter 13 for Overwhelming Debt

Some debts are overwhelming but not necessarily unpayable. If you’re in such a situation, Chapter 13 might be right for you. A Chapter 13 bankruptcy involves reviewing all of your debt and negotiating for sizeable reductions, not necessarily eliminations, of it. Once you manage to have creditors agree on the debt reduction percentage, you will be expected to pay off whatever is left over the course of three or five years. After that timeframe is up, if you made your best effort to pay off your debt but still couldn’t, the remainder may be discharged completely.

You might think, “Why would I want to use Chapter 13 if Chapter 7 can totally eliminate my debt?” One of the benefits of restructuring your debt through Chapter 13 is that creditors typically have less access to collateral property. If you cannot stand the idea of losing your home, car, and so on, Chapter 13 is more likely to protect those items since you are still paying some of your debt.

Making the Right Choice with Confidence

Even with the information given in this overview, you may understandably still have a great deal of questions and concerns regarding bankruptcy. It is a huge decision, one of the biggest in your life, and should not be rushed, after all. For more information, feel free to call 409.234.1490 and connect with Maida Law Firm, P.C. and our Houston bankruptcy attorney. We can help you sort the bankruptcy myths from the facts and tell you about similarities between both forms of personal bankruptcy options, such as automatic stays.

Contact us today to get your own FREE case review to get started.