What Are the Different Types of Consumer Bankruptcy?

There is no shame in filing for bankruptcy if this is the step you need to take to get you and your family back up on your feet. Once you come to terms with this, your next consideration may be which bankruptcy type would best help you and your family get the fresh start you desperately need. With this, your options are either Chapter 7 or Chapter 13 consumer bankruptcy. Follow along to find out the different types of consumer bankruptcy and how a proficient Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you choose the right one.

What are the different types of consumer bankruptcy to choose from?

You do not necessarily get to choose between filing for Chapter 7 or Chapter 13 bankruptcy. Rather, you may qualify for one or the other.

For one, Chapter 7 bankruptcy, also known as liquidation bankruptcy, has you liquidate a portion of your assets in exchange for the discharge of most or all of your debts. Essentially, this works with your bankruptcy trustee using the funds from your liquidated assets to pay back your outstanding creditors. Now, to qualify for this bankruptcy type, you must earn less than the average income in Kentucky. For an individual, this income limit is set at $57,509 per year.

So, if you earn above the average income, you may sooner qualify for Chapter 13 bankruptcy. This is why this bankruptcy type is otherwise referred to as the wage earner’s plan. Here, you may restructure your debt to pay it off at a reduced rate. That is, within a three- to five-year repayment plan, approved by the bankruptcy court in advance. In the meantime, you may be able to keep all your assets. To qualify, your total unsecured and secured debt must be less than $2,750,000. This is not to mention being up to date on all your tax filings, and not having filed for Chapter 13 bankruptcy in the past two years or Chapter 7 bankruptcy in the past four years.

What are the different alternatives to bankruptcy to choose from?

You may conclude that you do not truly qualify for a Chapter 7 or Chapter 13 bankruptcy filing. Or, both may seem simply unappealing to you. At any rate, you may be strongly considering alternatives to bankruptcy.

For example, you may rather negotiate a debt settlement agreement with your outstanding creditors to reduce the amount you owe on each debt. This, or negotiating a loan modification plan to restructure your repayment plan for each debt. You may even be satisfied with attending a credit counseling session, in which you may get educated on how to improve your financial situation without any negotiations or legal interventions necessary.

We strongly encourage you to retain the services of a talented Louisville, Kentucky consumer bankruptcy lawyer. You may do so by scheduling an initial consultation with Schwartz Bankruptcy Law Center today.