Our Indiana Attorneys Help You Understand the Differences Between Chapter 7 and Chapter 13 Bankruptcy
We explain the bankruptcy process clearly and guide you each step of the way
Your financial circumstances, types of debt and repayment abilities will determine which type of bankruptcy you file. The lawyers at Gouveia & Associates assist you in determining whether a Chapter 7 or Chapter 13 is best suited for your needs and financial situation during bankruptcy. A Chapter 13 bankruptcy is generally the better choice if you:
- Are behind on a mortgage or business payment and want to keep your property
- Have significant student loan debt, tax debt or other debt not eliminated in Chapter 7
- Exceed the income requirements to qualify for a Chapter 7 bankruptcy
What are the pros and cons of Chapter 7 Bankruptcy?
The benefits of filing a Chapter 7 liquidation bankruptcy include:
- A fresh start — After your Chapter 7 is finalized you will be cleared of all debt except for those connected with secured assets. For those, you will sign a Reaffirmation Agreement to continue your payment obligation. You will be able to maintain possession of any wages or non-inherited property you gain after filing bankruptcy.
- Quick resolution — Chapter 7 often takes only three to six months to obtain discharge.
There are also some significant disadvantages to filing a Chapter 7 bankruptcy, including:
- Property liquidation — Any property not qualified for an exemption under Chapter 7 will be sold to pay your debt. This form of bankruptcy is therefore not appropriate if you want to avoid foreclosure on an overdue mortgage payment or maintain possession of other secured assets after the bankruptcy.
- Income restrictions — Some people do not qualify for a Chapter 7 bankruptcy because they exceed its income requirements. To qualify, we will evaluate your income with the Chapter 7 means test, which determines whether you have the means to pay your debt without filing bankruptcy.
What are the pros and cons of Chapter 13 Bankruptcy?
When deciding which type of bankruptcy is the better option in your case, consider the following major advantages of the Chapter 13 approach:
- Maintained possession of property — Chapter 13 is the most attractive option if you want to prevent foreclosure on a home, repossession of a vehicle or the sale of other precious non-exempt property. This form of bankruptcy allows you to keep your property even when it is not exempt under Indiana law.
- Resolution of more types of debt — In your repayment plan you can include debt you acquired through large credit card charges for high-priced luxury items, such as purchases exceeding $1,150 made within 60 days of filing for bankruptcy. While this will not eliminate debts from back taxes or child support, you have more time to make payments to clear yourself of these debts.
- No time constraint between filings — Unlike a Chapter 7, which can only be filed once every 6 years, a Chapter 13 bankruptcy may generally be filed at any time.
The major drawbacks to the Chapter 13 form of bankruptcy include:
- Maximum debt requirement — To declare Chapter 13, you must have less than $1,000,000 in total secured debt and less than $360,000 in undisputed debts.
- Longer bankruptcy duration — Your plan and therefore your debt will last for three to five years.
- Post-bankruptcy wages are included in repayment — Because your repayment plan involves the use of your post-filing income, your money is tied up in bankruptcy payments during the duration of your plan period.
Speak with one of our skilled bankruptcy attorneys if you have further questions about the differences between Chapter 7 and Chapter 13 bankruptcy. We take a close look at your financial situation to offer you candid and experienced counsel on your options for clearing your debt.
Our bankruptcy lawyers, located in Merrillville, Indiana help you decide whether your case calls for Chapter 7 or Chapter 13
We offer a free, thorough initial review of your financial situation. Email us or call us at 219-576-6192 to schedule your free consultation. Our office is open weekdays from 8 a.m. to 4:30 p.m. We are conveniently located near the intersection of Route 30 and Interstate 65 in Merrillville, Indiana, with free parking available. If you are considering bankruptcy, contact an experienced attorney at Gouveia & Associates today.