Chapter 7 is the most common option for bankruptcy in the United States. However, according to the U.S. Courts, Chapter 13 is the second most used form, with 120,002 filings in 2021.
Though Chapter 7 is more straightforward, Chapter 13 gives you more options and might allow you to keep certain assets. Keep reading to see if Chapter 13 is the best course of action for you.
1. Income qualifications
Even though you have significant debt, you might make too much income to qualify for Chapter 7. The tricky part is that you also must earn enough to qualify for Chapter 13. This is because Chapter 13 reorganizes your debt, and even though you might receive a discount, you still need to make payments.
Chapter 13 is only a good option if you can afford the restructured payment plan. You considered filing for bankruptcy in the first place because of financial struggles, so you must consider this option very carefully. Luckily, plenty of software and financial advisors can help determine if Chapter 13 is right for you.
2. Debt qualifications
There is also a debt limit for Chapter 13. You might want to investigate Chapter 11 bankruptcy if you have too much debt. However, for most individuals, Chapter 13 is a viable option.
Chapter 13 is a good option for small business owners or individuals with a steady job that allows them to make payments. Though Chapter 7 might seem more straightforward, take some time to learn about Chapter 13 and study your finances before you declare bankruptcy.
