If you’re barely making the minimum payments on your debts, filing bankruptcy could be the best way to regain your financial footing. While deciding to file may be relatively easy, choosing which type of bankruptcy to pursue can be challenging, especially if you qualify for both. At the end of the day, both Chapter 7 and 13 have advantages and drawbacks. Here’s what you should know about these two means of discharging debt, so you can choose the right one given the circumstances. 

Who Should Consider Chapter 7

Chapter 7 bankruptcy was designed for those who have no income left to put toward their debt after covering the necessities. There is no limit on the amount of debt you can discharge by filing Chapter 7; however, you must liquidate nonexempt assets to pay back creditors at least partially. Nonexempt assets include those that are not considered essential in order to live, like second homes, additional vehicles, and valuable collections. Once the liquidation proceedings are over, any remaining applicable debts are discharged. 

Who Should Consider Chapter 13

Chapter 13 is for those who earn too much to qualify for Chapter 7 but are still struggling financially because of the debt they have accumulated. There are limits on the amount of debt you can discharge by filing Chapter 13. As of 2018, petitioners can eliminate nearly $395,000 in unsecured debt and $1,184,200 in secured debt. The greatest advantage of Chapter 13 is that you get to keep all of your property, including that which would be considered nonexempt in Chapter 7. Instead of liquidating assets, Chapter 13 proceedings require petitioners to devise a more manageable payment plan lasting for three to five years. After the plan has ended, all remaining applicable debts are discharged. 

If you’re thinking about filing bankruptcy, turn to Lonneman & McMahan PLLC in Elizabethtown, KY. For more than three decades, this general practice firm has been helping clients throughout Hardin County resolve all kinds of legal issues. Whether you need a strategic criminal defense lawyer or an aggressive family law attorney, you can rely on their team for comprehensive counsel and one-on-one attention at every stage of the proceedings. To schedule a free consultation to discuss filing bankruptcy, fill out the form on their website or call (270) 765-2190.