Bankruptcy Guide: Chapter 7 or Chapter 13?

chapter 7 bankruptcy sacramento ca guide
Sacramento bankruptcy attorney’s receive a lot of questions and calls about the different types of bankruptcy that are available to to individuals and families.

The two types of bankruptcies designed to assist individuals and families are: Chapter 7 and Chapter 13.  Chapter 7 requires the individual to “qualify” whereas Chapter 13, which is essential debt reorganization, does not.

Qualifying for Bankruptcy

There are guidelines regarding who may classify for these types of bankruptcies.  In order to file for Chapter 7, for example, an individual must undergo a three-part financial “means test”.  If he or she qualifies under any of the three mathematical algorithms associated with Chapter 7 means test then he or she has the option of filing for Chapter 7 bankruptcy protections.

Choosing Between Chapter 7 or Chapter 13

As a Sacramento bankruptcy lawyer I can help you decide which of these two types of bankruptcy protections would meet your desired goals.  The short response is to ask yourself is: do I want to keep my property or walk away from it?   Chapter 7 bankruptcy is a total liquidation bankruptcy.  You will forfeit all of your possessions for the ability to walk away from the table debt-free.  To individuals with underwater mortgages, medical bills or other debts in the double-digit thousands, Chapter 7 is usually the best answer.  If, however, you wish to keep your home, if you believe that within the next 3-5 years you will recover from your current financial situation then Chapter 13 is better suited.

Chapter 13 bankruptcy and Chapter 7 account for most of the filings we Sacramento bankruptcy attorneys perform each month.

Chapter 13 is sometimes called “wage earner’s bankruptcy” because it is a) for individuals (not companies), and b) better suited for individuals who are earning money but cannot get out from under debts that have accrued due to high interest rates or past burdens of temporary job loss.  Chapter 13 allows an individual under the protections and oversight of the courts to restructure their debt in such a way as to be able to make payments to their creditors, but also survive and potentially get ahead again.  The courts will look at the debts, the individual’s income and means, and then create a 3-5 year repayment plan.  At the end of the scheduled debt repayment plan all debts that were not covered under the plan are discharged.

Under both Chapter 7 and Chapter 13, individuals are guaranteed an “automatic stay” from collections and creditor harassment.

As your Sacramento bankruptcy lawyer I can help you make the best decision for your particular set of circumstances.

It may be that after reviewing your financial records and situation that you could forgo bankruptcy as an option altogether. If you are dealing with collections calls, financial obligations beyond what you can afford, and struggle each week to both pay bills and eat then please contact an attorney today.  You don’t need to go through this alone.  Call me, a Sacramento bankruptcy lawyer,  today!  877.273.7383

Contact us today to speak with a compassionate Sacramento bankruptcy attorney.