Wednesday, July 24, 2013

Which type of bankruptcy is right for me?

As a New Mexico bankruptcy lawyer, I'm often asked which type of bankruptcy is the best. The real question is which type of bankruptcy is best for the particular individual's situation. Here are a few thoughts about Chapter 7 and Chapter 13 bankruptcies. Chapter 7 Bankruptcy is the most common because it gives people a fresh start. A Chapter 7 case usually takes between 4 to 6 months to complete from beginning to end. The discharged debts from Chapter 7 bankruptcy are permanently gone.

Chapter 13 bankruptcy is the second most used type of bankruptcy for individuals. The requirements for a Chapter 13 is that you make payments towards your debts for the next 3-5 years. Filing under a Chapter 13 bankruptcy can stop home foreclosure proceedings; although you will still have to make timely mortgage payments that come due during the course of the Chapter 13-bankruptcy plan.

You can use Chapter 13 bankruptcy proceedings to eliminate a second mortgage while maintaining possession of your home, if your home has declined in value to point where the second mortgage is wholly unsecured (or in other words where the lien holder would receive nothing in foreclosure).

Chapter 13 bankruptcy is also used because an individual is in a high income bracket, as higher income individual may not qualify to file a Chapter 7 bankruptcy based on the means test. Chapter 13 is also chosen if the individual has a lot of assets or filed for Chapter 7 bankruptcy in the last 8 years.


An attorney can analyze which type of bankruptcy is best for you, or if bankruptcy is necessary in your situation. Be sure to contact a local bankruptcy attorney to assist you with your financial situation. 

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