There are many different types of bankruptcy available to individuals in an assortment of different circumstances. Many people specifically think of Chapter 7 bankruptcy when they think of individual bankruptcy. Those in specialized industries, including farming and fishing, might be eligible for a Chapter 12 bankruptcy.
However, Chapter 13 bankruptcy filings are among the most common for individuals in need of debt relief. A Chapter 13 bankruptcy involves a multi-year repayment plan followed by the discharge of the remaining balance on eligible debts. Successful professionals and those dealing with a temporary financial setback often decide that Chapter 13 bankruptcy is the right option for them.
What makes Chapter 13 proceedings so attractive to successful professionals and small business owners?
There is no means test to pass
Chapter 13 bankruptcy is accessible to those with competitive and above-average wages. The same is not true of Chapter 7 proceedings. For people to qualify for Chapter 7 bankruptcy, they have to adjust their household income and compare it to the state median based on household size.
Means testing prevents most successful professionals from qualifying for Chapter 7 bankruptcy. There is no means testing process in Chapter 13 bankruptcy. Even those who have earned hundreds of thousands of dollars in the last six months can still qualify for a Chapter 13 filing.
There is no risk to personal property
In a Chapter 7 bankruptcy, the person filing has to provide a thorough inventory of their assets. The law does allow filers to exempt certain resources. In some cases, people have to liquidate or sell off some of their most valuable property to qualify for a bankruptcy discharge.
There is no such requirement in a Chapter 13 bankruptcy. Successful individuals can protect all of their home equity and other assets while still eliminating debts that they struggle to pay. It is possible for people to eliminate hundreds of thousands of dollars in personal debt with a successful Chapter 13 bankruptcy without losing any of their property.
While the repayment plan does generally require careful budgeting to ensure compliance, filers who complete between three and five years of structured payments can eliminate the remaining debts they owe. Exploring different forms of bankruptcy can be beneficial for those struggling with debt and eager to improve their financial circumstances.
Chapter 13 bankruptcy is one of several options available for those with higher assets and income levels. Discussing personal circumstances at length with a skilled legal team can help an individual facing temporary financial hardship to determine the best form of debt relief to pursue given their circumstances.
