When you have debt problems that cannot be overcome without assistance, bankruptcy might be the best option. This form of legal protection stops collection calls and offers the chance to regain long-term financial stability. Most personal bankruptcies are filed under either Chapter 7 or Chapter 13. If you’re unsure about which path best suits your needs, an experienced attorney can guide you after learning some important information about your situation. 

For starters, Chapter 7 and Chapter 13 offer two different methods of debt relief. Someone who files for Chapter 7 bankruptcy should have non-exempt debts discharged once the legal proceeding ends. This usually takes between three and six months. On the other hand, Chapter 13 bankruptcy establishes a repayment schedule that lasts three to five years. Specific factors that can help determine which type works best include the following:

• Income and assets — Not everyone is eligible for Chapter 7 relief. Your income must be below the state median for a household of your size. This is referred to as the “means test.” If you do not qualify under the means test, you can file under Chapter 13. In a Chapter 7 proceeding, certain assets you won might be sold or “liquidated” by the trustee in order to provide partial repayment to your creditors. You might opt for Chapter 13 if you own property that you’re worried about losing, particularly if you are earning a steady income. 

• Prior bankruptcy history — Given that the elimination of debt is such a powerful measure, individuals generally must wait 8 years between Chapter 7 filings. Other waiting periods exist as well.

• Home ownership — Your plans for your home can drive the decision. If you are behind on a mortgage but want to keep the house, Chapter 13 allows you to cure arrears over time and stop foreclosure, provided you can afford ongoing payments. In Chapter 7, you could be at risk of foreclosure or a trustee sale. 

• Types of debt — Though Chapter 7 eliminates several types of debts, including credit-card balances and medical bills, there are other obligations that are exempt, such as money owed on a student loan. When a large portion of your debt is not dischargeable, a Chapter 13 filing, which results in a reasonable repayment schedule based on your disposable income and regular expenses, might be preferable.  

The first step toward lasting debt relief is to speak with a qualified bankruptcy attorney. Anker Law Group represents South Dakota clients in various types of bankruptcy proceedings. To discuss how we can help you, please call 605-519-5967 or contact us online. Our office is in Rapid City.