Types of Bankruptcy
Many individuals and businesses become overwhelmed by debt. In these instances, bankruptcy may be the best option. Chances are you will benefit most from one of two types of bankruptcy procedures: Chapter 7 or Chapter 13.
Filing Chapter 7
Chapter 7 is the best option for small-business owners and individuals who have little or no disposable income. It doesn’t require any payment plans to creditors and essentially wipes out all debt with the exception of child support, spousal support, student loans and income taxes. You can even keep your house and car as long as the payments are current. In Chapter 7 Bankruptcy:
- Unsecured debt is discharged
- The process typically lasts 3-4 months
- Some property could be liquidated to pay debts
- Income must be less than the state median income to qualify
Filing Chapter 13
Chapter 13 is required for individuals with disposable income and differs from Chapter 7 in these ways:
- Creditors receive payment via a Chapter 13 repayment plan
- Lasts 3-5 years until the repayment plan is completed
- Property is not liquidated
- No income requirement
The decision to file for bankruptcy should be made under the direction of an experienced bankruptcy attorney. To find out which type of bankruptcy proceeding is right for you, call Earnshaw & Cownie Law Firm PC at (816) 246-4429.