How can you know if Chapter 7 or Chapter 13 is right for you?

It is not easy to make the choice to file for bankruptcy. Maybe you made this choice after months of struggling to keep up, or maybe you are tired of dealing with constant contact from creditors and debt collectors. You’ve had enough, and you’re ready to seek a better financial future through the bankruptcy process.

Making this decision is only the first step. You may also have to decide which chapter of bankruptcy is ideal for you. The two most popular options for individuals are Chapter 7 and Chapter 13, and there are different eligibility requirements for each. The right way forward for you depends on the details of your individual financial situation, the types of debt you have, and how you want to proceed through the bankruptcy process. Understanding both options can be helpful for anyone considering this step.

Why Chapter 7 may be right

Chapter 7 is liquidation bankruptcy. All assets of the debtor come into their bankruptcy estate, however the debtor then gets to exempt assets to protect them. Any assets that do not fit within the exemptions may be available to the bankruptcy trustee. The trustee will use these assets to repay some of your debts. However, most people keep all or most of their property under the exemptions. It is our job to protect as much of your assets as we can under the exemptions.

Many applicants prefer this option over Chapter 13 because it does not require a person to follow the terms of a debt repayment plan, and it only takes a few months to complete. This process also discharges eligible debts, including credit card debt, medical debt and other types of personal loans.

Why Chapter 13 may be right

Chapter 13 bankruptcy is an income-based reorganization. Not all individuals or married couples qualify for Chapter 7, based upon the criteria for evaluating income and expenses under what is called the “Means Test.” Others who qualify for Chapter 7 may opt to pursue a Chapter 13 proceeding to protect a home from foreclosure or protect valuable assets. This process takes longer to complete (3 to 5 years), but it does not require that you give up your personal property. If you choose this option, you will make payments according to a court-approved bankruptcy plan, and most debts remaining unpaid at the end of the plan are then discharged. This choice is often ideal for people who are facing foreclosure of their home or repossession of other valuable assets.

Learn more about your options

Before you file or make any important decisions regarding your future, you may want to speak with a qualified New Mexico bankruptcy attorney regarding the options available to you. Speaking with an experienced legal ally can give you the information you need to choose either Chapter 7 or Chapter 13 and move forward with the appropriate steps with confidence.