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Major Differences Between Common Types of Bankruptcy

Bankruptcy is a scary word for a lot of people. It can often seem like bankruptcy is the end of the world. When used correctly, bankruptcy can be a powerful tool to help people get their lives back on track and get out of debt. If you're considering bankruptcy, it's important to know the different types of bankruptcy available to you. There are several common types, each with its own unique benefits and drawbacks. In this blog post, our team at Poindexter Law Firm will discuss the major differences between these types of bankruptcy. We'll also provide information about what each type means for individuals or businesses. If you're thinking about filing for bankruptcy, make sure to consult with our qualified bankruptcy attorney in Burkesville, KY to learn more about your options!

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Chapter 7 Bankruptcy: Liquidation

Chapter 7 bankruptcy is also known as "liquidation bankruptcy." This type of bankruptcy allows the debtor to discharge most, if not all, of their debts. In order to qualify for Chapter 7 bankruptcy, the debtor's income must be below the median income for their state. If the debtor's income is above the median income, they may still qualify if they pass the "means test."

Chapter 7 bankruptcy is typically best for people who have a lot of unsecured debt, such as credit card debt or medical bills. It can also be a good option for people who are struggling to keep up with their mortgage or car payments.

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Chapter 13 Bankruptcy: Repayment or Reorganization

Chapter 13 bankruptcy is also known as "reorganization bankruptcy." This type of bankruptcy allows the debtor to repay their debts over a period of time, usually three to five years. In order to qualify for Chapter 13 bankruptcy, the debtor's income must be below the median income for their state.

Chapter 13 bankruptcy is typically best for people who have a steady income and are behind on their mortgage or car payments and want to keep their home and car.

It is different from chapter 7 bankruptcy in that the debtor's assets are not liquidated. Instead, the debtor creates a repayment plan to repay their debts over time.

If you are struggling with debt, our team at Poindexter Law Firm can help. We offer bankruptcy services and can help you understand your options. Contact our bankruptcy attorney in Burkesville, KY today to schedule a consultation!