Many North Carolina residents are facing a growing pile of debt, and if you count yourself among them, you may be looking for ways to find relief. Depending on circumstances, bankruptcy may be an option worth considering. If you decide to move forward with personal bankruptcy, you may end up doing so through either a Chapter 7 or a Chapter 13 filing.
Per Quicken Loans, some important differences exist between Chapter 7 and Chapter 13 bankruptcies, including how they work and how you qualify for them.
Chapter 7 bankruptcies
Often called liquidation bankruptcies because they involve liquidating some of your assets to pay back your creditors, Chapter 7 bankruptcies ask that you sell off “secured assets” so that the rest of your unsecured debt undergoes discharge. You may wind up having to surrender your home or vehicle in a Chapter 7 bankruptcy, but this is not always the case.
Chapter 13 bankruptcies
Instead of liquidating your assets, a Chapter 13 bankruptcy involves reorganizing them to make them manageable. Most of the time, you have somewhere between three and five years to pay back an agreed-upon amount. If you stick to your payback plan, other unsecured debts undergo discharge.
Chapter 7 and Chapter 13 bankruptcies both give you a potential way to dig yourself out of debt, but they also differ in terms of who may file for each type. You must take and pass a means test to move forward with a Chapter 7 filing. To file Chapter 13, you need to have a steady income and meet specific secured or unsecured debt criteria.