FAQs About Chapter 7 and Chapter 13 Bankruptcy

 Posted on November 27, 2019 in Bankruptcy

There is a multitude of reasons why a person can find themselves in debt. Credit card debt, student loan debt, mortgages and even medical debt are all common reasons why Americans owe money to lenders. In many cases, the amount of debt owed is proportional to a person’s income and they can make their monthly payments. In other cases, a person has so much debt that they are either constantly paying their bills late, not paying them in full or cannot pay their bills at all. In cases such as these, it is a good idea to look into the idea of bankruptcy. Though most people know what the basic idea is behind bankruptcy, many people still have questions about how it works, the process you go through and how it can help their situation. Here are some of the most commonly asked questions about bankruptcy.

What Is the Difference Between Chapter 7 and a Chapter 13 Bankruptcy?

These two types of bankruptcies are the most commonly filed types in the United States. A Chapter 7 bankruptcy is typically what people think of when they think of bankruptcy. If a person is able to get a Chapter 7 bankruptcy, all or most of their unsecured debts will be discharged or forgiven. However, there are thresholds that you must fall beneath before you can qualify for a Chapter 7 bankruptcy. Typically, higher-income individuals will not qualify to have their debts forgiven.

A Chapter 13 bankruptcy, also known as reorganization bankruptcy, can be an option for someone who does not qualify for a Chapter 7 bankruptcy but who is still having trouble paying their bills each month. In this type of bankruptcy, you enter into a repayment plan that lasts from three to five years. In this reorganization of debt, the monthly payments are also lower, making it easier for you to pay. At the end of the repayment period, the remaining debt is typically discharged.

Will I Qualify for a Chapter 7 Bankruptcy?

There are different qualifications for bankruptcy depending on the type you are filing for. If you are filing for a Chapter 7 bankruptcy, you have to qualify by passing the means test, which is a way to determine if you actually have the ability to repay your debts or not. The court will look at your current income and compare it to the median income for the state of Texas, which depends on your household size. If your income is less than the median income, you qualify.

Will a Bankruptcy Ruin My Credit Score?

Not necessarily. While it is true that a bankruptcy will lower your credit score, it should not completely ruin it. There are a couple of different factors that come into play when determining how your credit score will be affected by bankruptcy. For the most part, both people with good and not-so-good credit scores will experience around the same drop in score. The type of bankruptcy you choose will determine how long it stays on your credit report. A Chapter 7 bankruptcy will appear on your credit report for 10 years while a Chapter 13 bankruptcy will stay around for seven years.

A Boerne, TX Bankruptcy Attorney Can Answer All of Your Questions

If you are thinking that bankruptcy is your best option, or you are unsure if filing for bankruptcy is your best option, you should contact a knowledgeable San Antonio, TX bankruptcy lawyer. At the Law Offices of Chance M. McGhee, we can help you determine whether or not bankruptcy is right for your situation and what type you should consider. We understand how big of a decision this is and we are here to answer any questions that you may have. To get started, contact us today by calling 210-342-3400 to schedule your free consultation.

Sources:

https://wallethub.com/edu/d/bankruptcy-information/25546/

https://www.thebalance.com/what-is-chapter-7-bankruptcy-316202

https://www.thebalance.com/introduction-to-chapter-13-bankruptcy-316174