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Is Chapter 7 or Chapter 13 best for you?

The main types of bankruptcy that can be filed for by individuals in Georgia are Chapter 7 bankruptcy and Chapter 13 bankruptcy. If you've never used bankruptcy before, you need to know the key differences to decide which one is right for you. They both offer advantages and disadvantages, and every situation is different.

With Chapter 7 bankruptcy, your non-exempt assets are going to be liquidated or sold. The money generated is then given to the creditors to pay off as much of what is owed as possible.

For those with a lot of unsecured debt and a low level of income, Chapter 7 is usually the best. Once it is done, the unsecured debt is gone and there are no more payments to make. The assets that were lost are gone for good, but many essential assets are exempt, so you won't lose everything.

For those with a lot of debt but a significant amount of income, Chapter 13 may be a better option. Rather than liquidating assets to pay off the debt, this plan reorganizes your debt and gives you a payment plan that is affordable with your current earnings. You then have to make monthly payments until you've paid off what you owe.

Chapter 13 allows you to control your debt without losing your assets, and it's often used when changes in income levels have made it impossible to pay off debt that you only took on when you thought it would be affordable.

It's crucial to file for the right type of bankruptcy, picking the plan that will help you accomplish your goals and that fits with your lifestyle and income level. Never make the mistake of thinking that all bankruptcy options are the same.

Source: Quick and Dirty Tips, "Should You File Bankruptcy?," Laura Adams, accessed July 14, 2016

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