Choosing Which Bankruptcy Chapter to File
Many debtors assume they can choose which bankruptcy chapter to file. In some cases you can choose which chapter to file, but you’ll need to understand qualifications for each chapter before deciding. Yet, some may not have an option to choose.
Bankruptcy laws require debtors to meet income requirements for each chapter based on their state of residence and family size. The means test helps determine eligibility by reviewing income, expenses and what is being paid toward outstanding debt. If you have disposable income remaining after making necessary payments toward expenses and required debt, you may be eligible for Chapter 13 bankruptcy . Chapter 13 helps restructure debt into an affordable repayment plan based on monthly income. Disposable income is funds that remain after all necessary payments are made. This income would be directed toward outstanding creditors in the repayment plan approved by the court.
Chapter 7 bankruptcy may be a better option for those with little or no assets. The chapter is likely for those who have little income remaining to make payments on outstanding debt. This chapter allows qualifying debt to be discharged or wiped away; meaning the debtor is no longer liable for the debt.
As mentioned, each chapter has certain requirements that need to be met in order to file. In some cases, those seeking to file Chapter 7 may qualify for Chapter 13. In the end it depends on your personal situation. To gain a better understanding about your options review your situation with an experienced bankruptcy attorney .