Debt relief: Which bankruptcy chapter fits the circumstances?

Many Connecticut residents are struggling to keep their heads above financial waters. Some are merely experiencing minor setbacks and simply have to cut back on spending a bit to get things back on track. For others, however, additional measures might be necessary, such as exploring debt relief options, including the possibility of filing for Chapter 7 or Chapter 13 bankruptcy.

Without a background in bankruptcy law, it can be difficult to determine which option best fits a particular situation to help resolve major financial problems. There are benefits to both, but what works for one person may not even be a possibility for another. There are many determining factors, such as whether the individual qualifies under the means test that is required in Chapter 7 proceedings.

This test assesses whether a individual’s current income exceeds the mean in his or her home state. If so, or if he or she is able to use disposable income to repay debts under a restructured plan, then Chapter 7 may not be an option. However, Chapter 13 typically allows a filer to make payments pursuant to a court-approved plan toward what is owed until the debt is satisfied within three to five years.

Chapter 13 can also help a homeowner stop the foreclosure process, providing no other filings for bankruptcy occurred in the past two years. On the other hand, Chapter 7 generally (but not always) involves complete liquidation of all assets in order to pay creditors. To seek clarification of bankruptcy laws and discuss a particular situation, anyone in need of guidance may request a meeting with an experienced debt relief attorney in Connecticut.

Source: FindLaw, “Chapter 13 vs. Chapter 7 Bankruptcy“, Accessed on Feb. 8, 2018