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Should I file for Chapter 13 or Chapter 7 bankruptcy?

The absence of a repayment plan is one of the biggest ways in which Chapter 7 differs from Chapter 13 bankruptcy. There are many other differences as well, including an income cutoff regarding eligibility to file for Chapter 7 bankruptcy. In Connecticut, individuals who earn under a certain income threshold may qualify for Chapter 7 while still being curious about the benefits of Chapter 13. Here are a few key differences to consider.

Whether a person owns a home and a car or rent a home and uses public transportation can influence which bankruptcy to choose. In Chapter 7, assets such as motor vehicles and houses must usually be given back to the bank, unless it is possible to reaffirm them. Those who file for Chapter 13 can typically keep these types of property so long as they adhere to their payment plan.

Debts from divorce are also handled differently. In Chapter 7, individuals may not be able to discharge debts owed for property settlements if their ex-spouse objects. There may be exceptions for those who can demonstrate that they would not be able to repay the debt even after bankruptcy, or that the relief of discharging the debt outweighs any ill-effects on their ex. In Chapter 13, these debts are usually included in the repayment plan, with any remaining debts upon successful completion of the plan then discharged.

Those who have filed for Chapter 7 bankruptcy in the past will have to wait for a period of at least eight years before it's possible to do so again regardless of their income, although they may still file for Chapter 13. Even first-time filers who initially seek Chapter 7 may have their case converted to a Chapter 13 if the court believes that their income is sufficient to do so. However, getting the bankruptcy filing right the first time can be essential for those who are dealing with time-sensitive debts, so Connecticut residents should be certain that they understand both the differences and benefits of both Chapter 7 and 13.

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