Filing for bankruptcy can help you get back on track, but it can also be a little confusing to know how to go about it.
Many people file for chapter 7 or chapter 13 bankruptcy, because both chapters can immediately prevent creditor’s collection efforts and wage garnishment.
From there, the two types have many differences. Read on to learn which might be most helpful for you.
With chapter 7 bankruptcy, wages you earn and property you purchase after the bankruptcy filing date will belong to you, instead of creditors or the bankruptcy court. There’s no minimum amount of debt required to file and cases typically last about three to six months.
However, if you had co-signers on a loan, they will still carry your debt (unless they file for bankruptcy protection too).
For those whose car or home is not completely covered by Indiana bankruptcy exemptions, chapter 7 won’t absolve these secured assets. Also, for those who face foreclosure, you’ll receive an automatic stay filing that is only a temporary guard against foreclosure.
If you have already filed with chapter 7 and you received a discharge of your debts, you’ll have to wait eight years after you filed the first case to file another.
Under chapter 13, debtors create a plan to make payments to creditors over the course of three to five years, depending on whether the debtor’s monthly income is less or more than the Indiana income median. During the payment plan, creditors are barred from starting or continuing collection efforts. This plan allows you to keep all exempt and non-exempt property, unlike chapter 7.
Other differences from chapter 7 include your co-signer’s immunity to creditor’s efforts. Meanwhile, you receive protection against foreclosure on your home. You can also file a Chapter 13 bankruptcy multiple times.
However, to qualify for chapter 13 bankruptcy, your unsecured debts must be less than $394,725. Secured debts must be less than $1,184,200. You won’t qualify under any conditions if you are a stockbroker or commodity broker.
Your debts are also not canceled, though they may be reduced. Unfortunately, chapter 13 also requires your involvement in the bankruptcy court process for the entirety of the three- to five-year plan.
Contact an attorney for more help
With over 65 years of combined experience as bankruptcy attorneys, we understand that you may be in a tough spot deciding between these two options. Contact Adelsperger & Kleven to further discuss which plan may work for you.