How do I know which Chapter of bankruptcy to file?

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How do I know which Chapter of bankruptcy to file?

A 7 or 13?

Asked on April 17, 2014 under Bankruptcy Law, Ohio

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

Bankruptcy is a complicated subject, and if at all possibe, you should consult with a bankruptcy attorney before proceeding. That said, Chapter 7 is a good choice if you don't have much in the way of assets (e.g. real estate; bank or brokerage accounts; valuable personal property, like vehicles) to protect, because in Chapter 7, all your assets, minus certain ones that are protected, are liquidated--basically, sold for the benefit of your creditors. Your creditors get as much money as they can get from the sale and distribution of your assets, then your debts are discharged.

Chapter 13 is a good choice if you have assets you'd like to protect but have the income to handle to a payment plan, if the debts are restructured in a way that's favorable to you. Under chapter 13, the court will set out a "plan"--basically a court-approved budget--under which all your discretionary income will go to paying creditors as much as possible for the next (usually) 5 years, after which your debts are discharged. Your assets are not liquidated.


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