Deciding between Chapter 7 and Chapter 13 bankruptcy depends on several factors. This post covers the household income comparison, the role of assets, and the types of debt that can be discharged.
Frequently Asked Questions
How do I know if I should file Chapter 7 or Chapter 13?
Whether Chapter 7 or Chapter 13 is the right filing comes down to a few factors. There are two things that are looked at mainly when determining whether a person qualifies for Chapter 7 or Chapter 13. One is income.
When filing a bankruptcy, there is something called the means test analysis, which is where the gross annual income for the household is compared with the median gross annual income for a household of that size. What the income level is can determine whether a person qualifies for Chapter 7 or Chapter 13.
Then there are assets. Assets are a key factor because a Chapter 7 is a liquidation where the court and the trustee that oversees the case are actively looking at the value of the property, and whether there is property that may be at risk in a Chapter 7 could lead to filing a Chapter 13 to make sure that assets are protected.
A third factor that comes into play is the different types of debts that can be discharged in the different types of bankruptcies. There are certain debts that cannot be discharged in a Chapter 7 that can be discharged in a Chapter 13, and that may make it more advantageous in those situations to file the Chapter 13.
Are you struggling financially? Pratt & Maegli Law Firm in Rockford helps Illinois families and individuals explore Chapter 7 and Chapter 13 options with clear answers and a personal approach. Call (815) 315-0683 or visit rockfordbankruptcytoday.com to schedule a confidential consultation and take the first step toward real financial relief.