Chapter 13 vs. Chapter 7: Which bankruptcy option is best for you?

People who are considering bankruptcy as a way to eliminate their financial obligations have several choices, including Chapter 7 and Chapter 13.

The filing of a bankruptcy can provide financial relief for people who are struggling with significant medical expenses, credit card debt, high and delinquent mortgage payments and other outstanding obligations. Long Island residents are not the only people who file for bankruptcy. Nationwide, over 936,000 people filed a bankruptcy proceeding in 2014. Of those, approximately two thirds of those people filed for a chapter 7 and approximately one third of those filed a chapter 13 bankruptcy proceeding. These are the two primary options to obtain relief from your debts and an opportunity to obtain a discharge to extinguish existing liabilities.

Chapter 7 Liquidation

A chapter 7 bankruptcy permits debtors to discharge their financial obligations and eliminate debts that they are unable to pay. Certain debts such as student loans, restitution obligations and some tax liability cannot be discharged in a bankruptcy proceeding.

Under the law, Debtors who file a bankruptcy proceeding are permitted to exempt or protect certain assets.

The vast majority of cases that are filed are cases wherein individuals filing the bankruptcy will not jeopardize or lose assets. Your personal property, residence and assets must be analyzed on a case by case basis according to both New York State and Federal exemption laws to ensure that you are not jeopardizing the loss of property that belongs to you.

Chapter 13

A chapter 13 is a repayment plan that reorganizes your debt into a consolidated, manageable plan and enables you to tender a single payment to a chapter 13 trustee who distributes monies among your creditors. Oftentimes, this repayment plan results in a repayment of only a small portion of your debt with you obtaining a discharge as to any remaining balances on the debt after a five year repayment plan.

Understanding your options

An experienced bankruptcy firm such as ours who has had extensive experience before the United States Bankruptcy Court is capable of analyzing and determining which bankruptcy proceeding is most beneficial to clients electing to file bankruptcy.

Prospective clients should understand that it is important for any clients to meet with us and obtain a free consultation and be educated as to the bankruptcy options available to them. This is a process where any clients should have a full understanding of whether, in the opinion of an experienced bankruptcy attorney, such a proceeding makes sense and what the benefits of filing such a bankruptcy will be to you.

More often than not, most people that consult with us are eligible to file bankruptcy and find a dramatic improvement in their financial position by eliminating burdensome debt and obtaining a fresh start. The fear and anxiety of overwhelming debt can be completely eliminated by pursuing bankruptcy as an option.

Keywords: bankruptcy, Chapter 7, Chapter 13