What Type of Bankruptcy Should I File?

Have you asked yourself “what type of bankruptcy should I file?”  If so it is first important to understand the benefits and drawbacks of both chapter 7 and chapter 13 bankruptcy.  Choosing between chapter 7 and chapter 13 bankruptcies is the first and most important decision you will make when filing bankruptcy. As noted on our Can I File Bankruptcy? page, you may not qualify for both chapter 7 or chapter 13 bankruptcy but if you do, you should be aware of the advantages and disadvantages of each.

Advantages and Disadvantages of Chapter 7 Bankruptcy:

  • The best part about a chapter 7 bankruptcy that it is a quick process that typically last between 4 and 6 months; after which you obtain your bankruptcy discharge and can enjoy the fresh start bankruptcy affords you.
  • After 4 to 6 months you will receive your bankruptcy discharge and will not have to make payments to the trustee for years, as you would in a chapter 13.
  • The significant disadvantage of chapter 7 bankruptcy is that you will have to surrender all non-exempt property to the trustee, or buy your property back from the trustee in lump sum.
  • Another disadvantage of a chapter 7 bankruptcy is that it cannot protect you from secured creditors, such as the bank who holds the note and mortgage on your home, who can foreclose on their secured property unless you bring the debt current. Unlike a chapter 13, a chapter 7 bankruptcy will not allow you to make up passed due balances or arrearages on debt overtime.
  • Your future income is protected from the trustee in a chapter 7, unlike a chapter 13, where you must commit all of your disposable monthly income to your chapter 13 plan.
  • There is no limitation on the amount of debt that can be discharged in a chapter 7.

Advantages/Disadvantages of Chapter 13 Bankruptcy:

  • You will be able to make up past due arrearage on secured debt (mortgages) or child support in your plan.
  • Your non-exempt property will not be taken by the trustee.
  • Chapter 13 debtors cannot have unsecured debt that exceeds $336,900.00 or secured debt exceeding $1,010,650.00.
  • If your earnings go up, raising your disposable income, the chapter 13 trustee can require you to pay more per month than originally posed by your plan.
  • Your income tax returns will be confiscated by the trustee during the course of your plan.
  • If you cannot make all of the payments required by your plan your bankruptcy will be dismissed without discharge, resulting in your paying unnecessary fees to the trustee and creditors.

If you have questions regarding bankruptcy and the type of bankruptcy that may be right for your please contact Jacksonville’s debt relief lawyer, Matthew C. Bothwell, Esq. for a FREE INITIAL CONSULTATION. We are here to help.