The vast majority of personal
bankruptcy filers opt for either a
Chapter 7 or a
Chapter 13. If you are considering filing for bankruptcy, you will more than likely
be filing a Chapter 7 or Chapter 13. Which bankruptcy is right for you?
There is no “one-size-fits-all” answer to this question. The
“right” answer comes down to the types of debts you have,
your income, and how much you owe.
About Chapter 7 Bankruptcy
With a Chapter 7 bankruptcy, the debtor is able to “wipe out”
many types of debts, such as credit card debt, past-due medical bills,
utility bills, cellphone bills, and personal loans. However, not all debtors
qualify for a Chapter 7.
Chapter 7 bankruptcy is reserved for low-income debtors who really need
it. In order for a debtor to qualify for Chapter 7, they must pass the
bankruptcy “means test.” With the bankruptcy means test, the
debtor’s income is compared to the state’s median income for
a household of their size.
If the debtor’s income is below Pennsylvania’s median income
for a household of their size, the debtor automatically qualifies for
a Chapter 7. If the debtor’s income is too high, he or she will
be referred to a Chapter 13, debt reorganization bankruptcy, instead.
About Chapter 13 Bankruptcy
Chapter 13 is a debt reorganization bankruptcy where the debtor pays off
all, or a portion of their debts over a 3 to 5-year time period. The terms
of the bankruptcy repayment plan are governed by the debtor’s available
disposable income each month after necessities are paid.
Chapter 13 is also utilized by debtors whose homes are threatened by
foreclosure. Chapter 13 offers homeowners a way to keep their home as long as they
are able to catch up on their past-due mortgage payments and continue
paying them throughout the life of the bankruptcy.
Are you interested in finding out
which bankruptcy is right for you? If so,
contact our office to schedule a free consultation with a Harrisburg bankruptcy attorney!