Bankruptcy might be a solution for you if you are drowning in debt that you cannot pay. Before deciding to file for bankruptcy in New York it helps to know the different types of bankruptcy available.
There are several different types of bankruptcy, but the two most common types filed by individuals are Chapter 7 and Chapter 13. There are some key differences between the two.
Chapter 7
A Chapter 7 bankruptcy discharges all your qualifying debt. This allows you to start over and get back on your feet.
However, not all debt qualifies for discharge in a Chapter 7 bankruptcy. Debts such as student loans, alimony, child support or tax debt are generally not dischargeable in bankruptcy.
Before deciding to file a Chapter 7 bankruptcy, you should review your debts to make sure they are dischargeable. If many of them are not, filing for bankruptcy may not be worth it.
Chapter 13
A Chapter 13 bankruptcy involves reorganizing your qualifying debts into a payment plan that is paid off over three to five years. There are some requirements you must meet to qualify for Chapter 13 bankruptcy.
For example, you must meet certain income requirements to demonstrate that you can keep up with the payments. The opposite is true in a Chapter 7 bankruptcy, where you must show that your income is low enough that you cannot pay your debt.
Your bankruptcy goals
One of the biggest benefits of a Chapter 13 bankruptcy is that it often allows people to keep important assets, such as a house or a car. However, a successful Chapter 13 bankruptcy depends on you making your payments over the three to five years, while a Chapter 7 bankruptcy typically only takes a few months to complete.
Both Chapter 7 and Chapter 13 bankruptcies will impact your credit, but there are ways to rebuild it post-bankruptcy. The type of bankruptcy that is best for you depends on your specific situation, so it is best to seek professional advice.
