Filing for personal bankruptcy is a massive decision. You want to make sure that you choose the option that will work best for your situation. Both Chapter 7 and Chapter 13 offer relief to borrowers who can no longer keep up with the burden of their debt. Each has different rules, benefits, and drawbacks. The implications of which you choose can affect you for years to come, so understanding your options is vital.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a legal option that will help you clear all eligible debts. It is also known as liquidation bankruptcy. This option involves a means test, where you must demonstrate that you have little or no disposable income after paying for necessities every month. One of the ways that can be determined is if your income is below the state’s median income. In Georgia, that adds up to $33,684 for a single individual and $44,048 for a couple. 

There are limits to how frequently you can file a Chapter 7 bankruptcy. Someone who has filed between six and eight years before will likely be ineligible to file this form of bankruptcy again.

This type of bankruptcy can clear debts very quickly. In general, debts are discharged between 90 and 120 days after filing.

One of the potential drawbacks of Chapter 7 bankruptcy is that you can lose some assets. Any assets over the exemption limits for your motor vehicles, personal property, and personal residence may be liquidated to cover any debts.

A Chapter 7 bankruptcy stays on your credit report for up to 10 years. However, the impact of bankruptcy on your score declines as the bankruptcy gets older. 

Chapter 13 Bankruptcy

If you have significant assets that you wish to preserve, or if your income level does not meet the Chapter 7 means test, Chapter 13 is an option. Chapter 13 is also available to people who are not eligible for Chapter 7 because of previous bankruptcy filed too recently. It is possible to file multiple Chapter 13 bankruptcies, but there must be at least two years between them.

With this type of bankruptcy, none of your assets are sold. Instead, you agree to a court-approved repayment plan. This plan generally lasts from three to five years. During the repayment period, your debts do not accrue any new interest. At the end of your repayment period, any remaining debt may be discharged.

Chapter 13 stays on your credit reports for up to seven years. 

No matter which form of bankruptcy you choose, you will get some relief right away. As soon as bankruptcy documents are completed and filed by your attorney, an automatic stay is granted. When this happens, creditors can no longer contact you to collect on the debt. The stay remains until your bankruptcy case is completed. 

If you have assessed your debts and concluded that filing is the best option for you, seeking legal counsel is the next step. A bankruptcy attorney in Atlanta can look over your financial situation and guide you toward the bankruptcy filing that suits your situation best.

Most people who file for bankruptcy say that their only regret is not filing sooner. Contact the team at Clark and Washington for a free consultation today to learn more about bankruptcy protection.