Why Do You Have To File Chapter 13 Instead Of Chapter 7?

Posted on: 2 June 2016

To find out if you qualify for bankruptcy, you must meet with a bankruptcy lawyer. During your initial consultation, the lawyer will most likely be able to tell you which branch of bankruptcy you qualify for and which is better for you. If the lawyer tells you that you must file Chapter 13, you may want to know why. Here are two main reasons your lawyer might be telling you this.

You Earn Too Much Income

One of the first steps a bankruptcy lawyer will complete is a means test. This test will determine how your income compares to the median income in your state. This test takes several factors into account, including your family size. If your income is higher than this amount, you cannot file for Chapter 7. This means you would have to file for Chapter 13.

This factor is important because when a person has a lot of income, it typically means the person is capable of repaying their debts. If a person does not have a lot of income, he or she probably does not have the means to repay the debt owed.

Your Debts Will Not Be Discharged

The purpose of a Chapter 13 bankruptcy plan is to help a person regain control over his or her finances. Because of this, a person is placed on a repayment plan for three to five years after filing for Chapter 13. This is a great option for people who owe money that would not qualify for a discharge through Chapter 7. Therefore, even if you do not make a lot of money, your lawyer might still suggest using Chapter 13, but only if your debts cannot be discharged.

Through Chapter 13, you will be given a chance to catch up on your debts through the repayment plan. Depending on your income, you may have to repay all the debts in full, or you might only have to repay a portion of the debts. Typically, you will be required to pay back 100% of certain debts, such as child support. You will also most likely be required to repay 100% of secured debts, but you may only have to pay a small percentage of the unsecured debts you have.

The only way to find out which branch you qualify for is by visiting a bankruptcy lawyer. When you make the appointment, you must prepare for it by gathering all your financial statements. For more information, contact D Derk Demaree Attorney at Law or a similar legal professional.