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Should I file Chapter 7 or Chapter 13 bankruptcy?

Filing bankruptcy is nothing to be ashamed of – it is intended to provide you needed protection, not to punish you. Serious debt can occur for a number of reasons, many of which are through no fault of your own.

If you are considering filing bankruptcy, it is important to understand the differences between Chapter 7 and Chapter 13, and how each option could be beneficial to your unique financial situation.



Chapter 7 bankruptcy

Chapter 7 bankruptcy is intended to discharge unsecured debts, which is why it is often called the “clean slate” form of bankruptcy. It can stop wage garnishments, creditor harassment and foreclosures.

Individuals can retain most possessions and property through a series of exemptions. These exemption limits are applied to the equity you have in the property. Equity is the difference between the value of the property and what you owe on the property.

To qualify for Chapter 7 bankruptcy, you must pass a means test if you are a higher income filer. If your income is below the Virginia median for your household size, you are exempt from the test and can file Chapter 7. If you do not pass the means test, Chapter 13 bankruptcy is still available to you.

Chapter 13 bankruptcy

Chapter 13 bankruptcy is often referred to as “debt reorganization.” The court allows you to propose a repayment plan you design, through counsel.

This plan usually takes anywhere between three and five years to complete, and any existing unsecured debts at the end of that plan may be discharged.  While certain debts will remain, such as student loans and past-due child support payments, your reorganization plan can account for these debts to help you get current.

Your unique situation will determine which filing is best for you. The bankruptcy attorneys at FerrisWinder, PLLC can provide a free consultation to review your finances and help you identify the best course of action. They can also be an advocate for you in bankruptcy court if needed. 



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