Plenty of New York residents are struggling to meet their debt obligations. If you are one of them, you are likely looking at all of the relief options the may be open to you, which has brought you here. Few options may sound good, but which makes sense for what you are trying to accomplish? For example, Chapter 7 and Chapter 13 bankruptcies can both offer immediate debt relief, but they do it in different ways. Which should you choose — if either?

To be clear bankruptcy is not the best solution for everyone. There are those who can improve their financial situations through other means. Personal bankruptcy, in either of its forms, is for those individuals who are so deep in debt or who are severely lacking in the income department that other debt relief options will prove ineffective.

Chapter 13 basics

A Chapter 13 bankruptcy is also known as a repayment or reorganization bankruptcy. If your Chapter 13 petition receives approval, a fixed period will be set for you to make payment to your creditors — usually three to five years. At the end of this payment term, remaining unsecured debts may qualify for discharge — meaning the court released you from liability for them.

The main benefits of a Chapter 13 bankruptcy are as follows:

• Ability to keep property
• Co-debtors are also protected
• Affordable repayment plan offered
• Immediate debt relief upon approval
• Immediate end to creditor harassment

In order to qualify for Chapter 13, it is necessary for you to have decent enough income so that you can make monthly payments to your creditors while still meeting your basic needs. Your debt amounts may also not go over certain limits, which is a subject legal counsel can discuss with you in more detail.

Chapter 7 basics

A Chapter 7 bankruptcy is typically called liquidation bankruptcy. You may have to sell property if you go this route. Some property is exempt from liquidation to a point, such as the following:

• Home equity
• Instruments
• Appliances
• Books
• Retirement accounts

The selling of property may seem harsh, but at the end of it all, if your petition receives approval, all qualifing debts will receive a discharge.

Chapter 7 bankruptcy is income restricted. To figure out if you qualify, you will need to take the means test. This can be obtained from legal counsel or online.

Which is right for you?

Most people will actually qualify for Chapter 7 relief, but there are those who won’t or who would rather apply for Chapter 13 bankruptcy protection. With the assistance of counsel, it is possible to really dig into your finances and determine which will best benefit your situation.