There are multiple forms of bankruptcy available for both businesses and individuals. Each form comes with its own benefits and drawbacks.
If you are an individual who does not operate a farm and does not fish professionally, the chances are good that the two forms of bankruptcy that will benefit you most are Chapter 7 or Chapter 13.
Both forms of bankruptcy offer an automatic stay to stop aggressive collection efforts and a discharge of unsecured debts if the courts approve the filing. Looking at the basics of these two different forms can give you an idea of which might be better for your current situation.
Chapter 7 bankruptcy is liquidation bankruptcy
Chapter 7 bankruptcy is arguably the more aggressive option. Also called liquidation bankruptcy, Chapter 7 proceedings involve providing a list of your assets to the courts during your filing and possibly selling or liquidating some of your belongings to repay your creditors. Certain assets have protection from liquidation, such as a particular amount of home equity.
Provided that you complete this process and that you qualify for Chapter 7 proceedings, they can be a relatively quick way to secure a discharge of your unsecured debts. In order to see if you qualify, you will need to compare your adjusted household income to the state median. For a single individual in New York, that amount will be $57,137.
Chapter 13 bankruptcy is a wage-earners plan
If you make too much money to qualify for a Chapter 7 filing or if you have assets that you want to retain instead of liquidating — a common concern for successful professionals with high levels of debt — Chapter 13 may be the better option for you.
In a Chapter 13 filing, an individual does not liquidate their assets but rather has to repay creditors in a court-approved plan for several years. This plan is meant to work within the constraints of the filer’s budget and, when successfully completed, will result in the discharge of the remaining unsecured debt.
Talking about your financial circumstances honestly with an attorney experienced in this area of law can give you an idea of which form of bankruptcy might offer you more protection and benefits.
