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Chapter 7 vs. Chapter 13 Bankruptcy: How Do I Decide?

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The question, “How do I file for bankruptcy?” can often be multifaceted and feel complicated. When considering bankruptcy, the first question to ask yourself should actually be, “What type of bankruptcy should I file for?” Many chapters of bankruptcy exist, but here we are going to discuss two of the most common and effective types: chapter 7 and chapter 13.

The type of bankruptcy you should file depends on the type of debt and your monthly income. If you are considering Wilmington bankruptcy, you should consult with an experienced Wilmington bankruptcy attorney at the Law Offices of John T. Orcutt in North Carolina.


Chapter 7 vs. Chapter 13

Chapter 13 bankruptcy allows debtors to propose a three-to-five year plan in which to repay their debts in full. Chapter 7 bankruptcy discharges debts but requires debtors to liquidate some assets to repay creditors.



Individuals with regular income qualify for both chapter 7 and chapter 13 bankruptcy. Those earning less than the North Carolina average monthly income qualify for a three-year payment plan in chapter 13 bankruptcy. Those earning more than the average monthly median income qualify for a five-year payment plan in chapter 13 bankruptcy. Individuals considering chapter 7 bankruptcy must pass a means test to determine if they earn more than North Carolina average monthly income.


Affect on Property

Chapter 13 bankruptcy plans settle debts with monthly income. Therefore, debtors who file chapter 13 bankruptcy retain all property including homes and automobiles. Chapter 7 bankruptcy plans will sometimes require debtors to sell some assets to repay creditors. Individuals should know that they may be required to liquidate nonexempt assets.


Time Period

Chapter 13 bankruptcy requires debts to be paid within a three-to-five year time frame depending on the type of debt and the debtor’s monthly income level. Chapter 7 bankruptcy is usually finished within a matter of months.

If you do not qualify for one chapter of bankruptcy, you may consider the other: each has different types of requirements and settles different types of debts. Filing for bankruptcy can be liberating, but filing can be confusing and tedious. To navigate legal policies and terms, consider working with a bankruptcy law firm in the North Carolina area.


Our Wilmington bankruptcy attorneys are experienced at helping individuals file for bankruptcy and can help you answer your most perplexing question: “What type of bankruptcy should I file for: chapter 7 vs. chapter 13?”

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