At McElroy & Associates, We Understand That Bad Things Can Happen To Good People

Get A Fresh Start Through Bankruptcy

When is Chapter 7 a better choice than Chapter 13?

On Behalf of | Oct 30, 2018 | Chapter 7 Bankruptcy |

If you decide that filing bankruptcy in Tennessee is the only option to your personal financial troubles, then you will next have to decide which type of bankruptcy to file. Your options are Chapter 7 and Chapter 13. Each offers distinct advantages and disadvantages, so you have to think about your personal situation when making the choice.

Looking at Chapter 7, Credit Karma explains that you will only have this option if you can meet the income limits. Essentially, you need to have little disposable income which you can use to repay your debts. So, if your financial struggles are due to a lack of income, this may be the best option. However, you may also lose more of your assets with Chapter 7 because the court will seize any non-exempt assets. Also, if you have a home or a vehicle you have a loan on, you will probably lose them as well. So, this type of bankruptcy is best if you have few assets and rent your home or own your home and a modest vehicle. Finally, Chapter 7 is much faster than Chapter 13, so if you want things resolved fats, this is the best choice.

If you do not own your own or your vehicle, then you are probably better off filing Chapter 13. Do keep in mind this form of bankruptcy is a repayment plan. That means you can keep more assets, but you have to have the income to repay your debts based on a repayment plan set by the court. It also can take three to five years to finalize your case. This information is for education and is not legal advice.