You may feel anxious and ill-at-ease when your finances begin to spiral out of control, but rest assured – you are not alone. Many Kentucky residents struggle to stay top of their finances, and some of them find relief after making the decision to file for bankruptcy.
Per Quicken Loans, there are two main types of personal consumer bankruptcies: Chapter 7 bankruptcies and Chapter 13 bankruptcies. Both types give you a way to get a better grip on your financial affairs, but there are some important differences that exist between them.
Chapter 7 bankruptcy
To file for Chapter 7 bankruptcy, you need to meet a certain income threshold. You may take a means test to determine whether your income is low enough to consider this type of bankruptcy filing. When you file for Chapter 7, you may have to sell off some of your assets, such as your home, so that you are able to pay off some of your debts.
Chapter 13 bankruptcy
If you make too much to qualify for Chapter 7, or if you have valuable assets you have fears about losing, you may want to consider whether a Chapter 13 filing might fit your needs. Chapter 13 bankruptcies require you to reorganize your debts so that they become more manageable. If you file for Chapter 13 and keep up with your payback plan and mortgage and other payments, if applicable, you may typically hang on to your home and other assets.
You may also hear attorneys or others refer to Chapter 7 bankruptcies as liquidation bankruptcies and Chapter 13 bankruptcies as reorganization bankruptcies.