Filing for bankruptcy can be a daunting decision, but for many Raymondville residents facing overwhelming debt, it can offer a path toward financial stability. Two of the most common bankruptcy options available are Chapter 7 and Chapter 13. Understanding the differences between these options is essential for making an informed decision. This blog will guide you through the key distinctions and help you choose the right bankruptcy option for your situation.

What is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is intended for individuals with limited income who struggle to repay their debts. This type of bankruptcy can wipe out many unsecured debts, such as credit card balances and medical expenses, offering a fresh financial start. However, some of your non-exempt assets may be sold to repay creditors.

To qualify for Chapter 7, you must pass the means test, which compares your income to the median income in Texas. If your income is below this threshold, you are likely eligible for Chapter 7. Consulting with a bankruptcy attorney can help you assess whether this option suits your financial needs.

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy, commonly known as “reorganization bankruptcy,” is designed for those with a steady income who wish to retain their assets while repaying their debts. With Chapter 13, you establish a repayment plan that typically spans three to five years, during which you repay a portion of your debts based on your income and asset value.

This option can help you avoid losing your home or vehicle to a repossession lawyer or a foreclosure lawsuit. It’s also beneficial for those who have fallen behind on mortgage payments or car loans and need time to catch up. A debt relief attorney can assist in creating a manageable payment plan that allows you to retain ownership of essential assets.

Key Differences Between Chapter 7 and Chapter 13

The most significant difference between Chapter 7 and Chapter 13 is how debts are handled. In Chapter 7, most of your unsecured debts are wiped out, while in Chapter 13, you repay a portion of your debts over time. Another key distinction is asset protection. In Chapter 7, non-exempt assets may be sold, whereas Chapter 13 allows you to keep your property as long as you stick to the repayment plan.

Additionally, Chapter 13 provides options for stopping repossession and foreclosure, giving you more time to save your home or vehicle. Filing for bankruptcy also provides immediate relief from tax burdens and can stop legal actions like a debt collection lawsuit. However, it’s essential to consult with a debt relief law firm to understand the best option for your unique situation.

Which Option Is Right for You?

Choosing between Chapter 7 and Chapter 13 depends on several factors, including your income, the types of debt you have, and your long-term financial goals. If you’re struggling with unsecured debts and have few assets, Chapter 7 may be the most suitable option. On the other hand, if you have valuable assets you want to protect or need more time to pay off secured debts, Chapter 13 may be the better choice. A debt settlement lawyer can provide guidance on which bankruptcy option aligns with your needs.

Find the Right Bankruptcy Solution Today

 

If you’re considering bankruptcy in Raymondville, The Law Office of Joel Gonzalez can help you navigate the process and determine the best option for your situation. Whether you need assistance with filing Chapter 7 or Chapter 13, defending against a debt collection lawsuit, or exploring tax relief services, Joel Gonzalez is here to provide the support you need. Contact us today to start on your path to financial freedom.