Lawyer Referral Service

LRS Blog

Posted by: Maricopa Lawyers on Sep 22, 2016

Although bankruptcy allows you to eliminate some debts, it doesn’t get rid of all types of debt. Before filing for bankruptcy, it’s important to understand the types of bankruptcy and the kinds of debt they eliminate.

<h2> Chapter 7 bankruptcy </h2>

Chapter 7 bankruptcy is usually the easier option that allows you to eliminate more debt. Unfortunately, not everyone qualifies for this type of bankruptcy. If your average monthly income for six months prior to filing for bankruptcy is equal to or less than your state’s median income you may be eligible for Chapter 7. These are the reasons to file for chapter 7 bankruptcy:

  • If you are unable to repay your debt in a repayment plan- If the debtor is unable to repay their debts in a three to five-year repayment plan, Chapter 7 would be in their best interests.
  • If you need quick relief from creditors- After the bankruptcy court issues a discharge order of your debts, you will not be liable for what you owe creditors.
  • If most of your debt is dischargeable – Dischargeable debt includes things like credit card debts, medical bills or personal loans. If your debts are limited to dischargeable items, you should file for chapter 7 bankruptcy.

<h2> Chapter 13 bankruptcy </h2>

Chapter 13 bankruptcy allows you to repay some of your debts. It is also the type of bankruptcy that most people qualify for. The following are reasons you should apply for chapter 13 bankruptcy:

  • If you want to repay some of your debts – In chapter 13 bankruptcy you will be put on a payment plan that helps you pay off your debt in three to five years.
  • If you want to save your home from foreclosure – Because you plan to pay off your debts, chapter 13 bankruptcy will permanently stop a foreclosure.
  • If you want to stop repossession of your car – If you plan to continue to pay off your car loan in a chapter 13 bankruptcy you can stop the repossession of your car.