You may undoubtedly know that you are in over your head with personal debts. But what you may be unclear on is whether a Chapter 7 bankruptcy or a Chapter 13 bankruptcy filing is in your best financial interest, if any at all. Follow along to find out the difference between Chapter 7 and Chapter 13 bankruptcy and how a proficient Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you decipher which option is best suited for your current financial standing.

What is the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

First of all, a Chapter 7 bankruptcy filing may work to discharge your eligible debts, such as your credit card bills, medical bills, personal loans, etc. This may be done after your bankruptcy trustee collects certain assets and liquidates them. Your trustee may then take the earnings from these sold assets to pay back your outstanding creditors. All the while, the Kentucky bankruptcy court may protect your home from being foreclosed on, along with your being made victim of harassing collection activities.

On the other hand, a Chapter 13 bankruptcy filing may not prompt the liquidation of your assets. Rather, it may have you outline a three- to five-year repayment plan for the remaining debts owed to your creditors. So this may be of interest to you if you make enough income to meet your financial obligations, but your current situation requires a little more leniency in doing so. Of note, a Chapter 13 bankruptcy filing may offer similar protections for your home and from collection activities as Chapter 7.

Which consumer bankruptcy option is best for me?

It is not necessarily a means of picking and choosing between Chapter 7 bankruptcy and Chapter 13 bankruptcy. Rather, this decision may be made for you through the Chapter 7 means test.

Essentially, the means test takes your monthly income for the past six months, annualizes it, and then compares it to the median income for households of the same size throughout the state of Kentucky. This is to say that if you make more than this established income limit, then you may have no choice but to turn to Chapter 13 bankruptcy. Without further ado, the imposed income limits for Kentucky residents like yourself are as follows:

  • If you are a household of one: then you cannot make more than $51,824 annually for a Chapter 7 bankruptcy filing.
  • If you are a household of two: then you cannot make more than $61,945 annually.
  • If you are a household of three: then you cannot make more than $70,091 annually.
  • If you are a household of four or more: then you cannot make more than $97,902 annually, plus $9,900 for each additional household member.

Even if you are only considering a bankruptcy declaration, you must first consult with a talented Louisville, Kentucky consumer bankruptcy lawyer from Schwartz Bankruptcy Law Center. Contact our firm today.