While ChaotWhile Chapter 7 and Chapter 13 bankruptcies are both personal bankruptcies, they involve very different processes and may have different outcomes, too. Both types may give you a way to get back on your feet financially, but they involve different steps and eligibility requirements.
How do Chapter 7 and Chapter bankruptcies differ, and how do you know if one type might be more appropriate for you than the other?
Chapter 7 bankruptcy
If you have enough debt that there is no reasonable way for you to get rid of it within a few years, you may want to see if you pass the Chapter 7 bankruptcy means test. The means test compares your income against that of others in Louisiana to determine whether it is low enough for you to pursue Chapter 7 bankruptcy. This type of filing may involve liquidating your assets to pay back creditors.
Chapter 13 bankruptcy
Chapter 13 bankruptcy may be a better fit if you have at least some money available to put toward paying off debts. This type of bankruptcy filing involves you establishing a new repayment plan. If you make all payments as required by the plan and keep up with others, too, such as your mortgage payments, you may be able to file for bankruptcy while keeping most or all of your assets.
It may take somewhere between three and five months to finalizes a Chapter 7 bankruptcy case. A Chapter 13 bankruptcy case may take between three and five years to complete.