Chapter 7 vs. Chapter 13 Bankruptcy: Which is Right for You in Sacramento, CA

The decision to file for bankruptcy is a substantial one. When financial hardship occurs, it may feel overwhelming to navigate the intricacies of the various bankruptcy options available to you. Two key methods used in Sacramento are Chapter 7 and Chapter 13 bankruptcy. This blog post aims to break down these two options and offer advice to help you determine the most suitable method for your situation in Sacramento.

Understanding Chapter 7 Bankruptcy

The Chapter 7 bankruptcy process is typically quicker, taking around three to six months to complete. It is often referred to as a straight or liquidation bankruptcy. It serves to wipe out most of your general unsecured debts such as credit cards and medical bills without the need to pay back balances via a repayment plan.

It’s important to understand that not everyone is eligible to file for Chapter 7 bankruptcy. To qualify, you must pass the “Means Test”, which examines whether your income is low enough to allow debt elimination through this approach.

Appreciating Chapter 13 Bankruptcy

Unlike Chapter 7, Chapter 13 bankruptcy involves the creation of a repayment plan where you pay back a percentage of your debts over 3 to 5 years. This process not only addresses unsecured debts, but it also allows you to avoid foreclosure, make up missed car or mortgage payments, pay back taxes, stop interest from accruing on your tax debt and more.

Chapter 13 is generally the best option for those who have a regular income but still struggle to meet their monthly debt payment obligations.

Chapter 7 vs. Chapter 13: Major Differences

Both Chapter 7 and Chapter 13 bankruptcy can offer relief to those in financial distress, but they operate in different ways. Chapter 7 offers a way to wipe out debts entirely for those with lower incomes, while Chapter 13 allows for a structured repayment plan, making it a viable option for those with regular incomes.

Another critical difference lies in the handling of assets. In Chapter 7, you may need to sell some of your property to pay debts. Chapter 13, however, tends to protect your assets, as you’re using your income for repayments.

However, given the complexity and importance of the decision, it is crucial to seek professional help. Liviakis Law Firm can offer guidance based on years of experience and a deep understanding of bankruptcy laws.