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Choosing Between Chapter 7 and Chapter 13 Bankruptcy: What’s Right for You?

Man focused on a monitor while holding a piece of paper | Filing For Bankruptcy | Grady BK

At Grady BK, PLLC, we’ve had the privilege of guiding countless Central New Yorkers through the steps toward financial security. Bankruptcy is one of the fastest and most effective tools for debt relief, but the decision to file requires careful consideration. There are types or “Chapters” of bankruptcy that should be entirely understood before beginning any agreement.

To that end, this article will examine Chapter 7 and Chapter 13 bankruptcies, the differences between them, and how your individual circumstances can influence your financial goals. Then, we’ll walk you through the process of actually filing for Chapter 7 bankruptcy, which is the most common type we see in the North Country.

If you’re reading this, you’re probably feeling overwhelmed and unsure of how to climb out of debt. Our clients have benefited from our straightforward and compassionate guidance for years. Let us be the bankruptcy attorney you turn to for personalized solutions tailored to your unique needs.

When to Consider Bankruptcy

Deciding to file for bankruptcy is a serious financial choice. If more than half of your monthly pay goes towards debt payments, or if you’re dealing with lawsuits from creditors, it might be time to consider bankruptcy. Additionally, bankruptcy could be a logical solution if there is no realistic way to settle your debt within the next five years. It’s okay to feel uneasy about the decision. The purpose of bankruptcy is to provide relief to those in genuine financial distress.

Who Files for Bankruptcy?

More young Americans are trapped by consumer debt than ever before as wages stay stagnant and costs increase. The economic impacts of recent global events have caused several challenges for everyday people. Job losses, reduced working hours, and entire industries undergoing significant transformations have all led to financial instability for many millennials and young parents.

It’s not just young people feeling the pinch, however. The 65 and older crowd have more reasons than most to have collected considerable debt. For one reason, younger generations are living with their parents for longer into their lives than their parents or grandparents ever did. This obviously puts considerable strain on the older generations of these extended families. Medical expenses are another critical factor when it comes to senior citizen debt. Many in this age group would rather not burden younger family members with their healthcare costs, especially given the financial strains young parents are already facing.

What’s the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

Chapter 7 is seen as the quicker option, but it comes with restrictions. Chapter 13 allows you to keep important assets while you restructure your finances. When faced with the question of which one to choose, many Watertown residents opt for Chapter 7 because of its speed and efficiency. Chapter 7 erases eligible debts like credit card bills and medical costs. However, for those looking to stop a foreclosure or repossession or catch up on house payments, Chapter 13 offers a structured repayment plan.

Chapter 7 Bankruptcy

Chapter 7 lets you discharge, or wipe out, most of your unsecured debts without repayment. Student loans and most taxes are not wiped away. Regarding your assets (house, car, money in the bank, etc.) New York offers various property exemptions to protect your assets. This means most people who choose Chapter 7 keep all their assets. It’s important to note that Chapter 7 does not allow the discharge of certain loans or obligations, and eligibility is primarily based on your income. This type of bankruptcy is often ideal for individuals and families looking for a fresh financial start.

Chapter 13 Bankruptcy

Chapter 13 Bankruptcy allows you to set up a repayment plan for your debts. You pay back a percent of your unsecured debt, and the rest of the debt is wiped away at the end of the bankruptcy. This is good for those who earn a decent income, have assets they want to keep, or are behind on major payments like a mortgage. You’ll create a plan to pay off some or all of your debt over 3 to 5 years. At the end of that period, many of your remaining debts are wiped clean. One key benefit of Chapter 13 is its protection against house foreclosures, allowing you to catch up on missed mortgage or property tax payments.

How to File for Chapter 7 Bankruptcy

Gather essential details like creditor names, owed amounts, income sources, property list, and monthly expenses. Married people should include your spouse’s income details even if you aren’t filing together. This helps the court assess your overall household finances.

The next step is an online credit counseling course from a government-approved agency. What follows is an in-depth discussion with our experienced and compassionate bankruptcy attorney. We work with you to untangle the details of your life and translate them into comprehensive legal paperwork.

We then officially file the bankruptcy, and all your creditors are notified. The filing immediately protects you from creditor harassment, foreclosures, lawsuits, etc.

Our Role as your Chapter 7 Bankruptcy Lawyer

Once you file, the court assigns a trustee to handle your case. Their job is to review your paperwork and ask some questions. Part of this process involves a court hearing with the trustee. This is usually an online meeting where you, your attorney, and the trustee all discuss these issues together. After that, you are officially discharged and free of the debt holding you back. Now, with careful planning and a renewed sense of financial stability, you and your family can build the future you’ve always wanted.

At Grady BK, PLLC, we provide personalized financial guidance tailored to your individual needs. With a strong track record in the North Country, we’ve helped many families in Watertown throughout the bankruptcy process. Call us today at (315) 299-9005, and let us help you get back on track to a bright financial future.