3 Factors Your Bankruptcy Attorney Will Look At When Determining What Type Of Bankruptcy Relief Is Right For You

As you may be aware, there are several different types of bankruptcy relief that an individual can petition the court for. The most commonly used options are Chapter 7 and Chapter 13 bankruptcy. Before filing a petition with the court, your bankruptcy attorney will need to determine which of these options best suits your specific set of circumstances. In order to make this determination, your attorney will need to examine the following three factors.

Your Income

Both Chapter 7 and Chapter 13 bankruptcy will have income requirements that must be met in order to file for this type of debt relief. When filing for Chapter 7 bankruptcy you will need to demonstrate that your income in the previous year was less than the average income in your state. When filing for Chapter 13 bankruptcy, you will need to demonstrate that you currently have enough excess income to pay off a portion of your outstanding debts while not incurring any additional debt. That is why the first thing your attorney will do is to look at both your current income and your income over the past year. 

Your Debts

Different types of debt are handled differently by the bankruptcy court. For example, many unsecured debts such as credit card bills, utility bills, and medical bills can be discharged as part of a bankruptcy case. Other debts such as mortgages or car loans cannot simply be discharged under bankruptcy laws since these debts are secured by real property on which the creditor has placed a lien. Individuals with large amounts of debt who are eligible to be discharged are often best served by Chapter 7 bankruptcy since this type of personal bankruptcy does not require repayment in order to qualify for discharge. On the other hand, individuals with large amounts of secured debt may be best served by Chapter 13 bankruptcy since this option will allow them to become current on their debt over an extended period of time in order to prevent the loss of their assets. This is why your bankruptcy attorney will need to carefully examine both the amount and type of your debts. 

Your Ability To Pay

Chapter 13 bankruptcy will require you to repay some of your debt over the course of several years in order to qualify for your remaining debt to be legally discharged. If you fail to follow through with the terms of repayment issued by the court, your bankruptcy petition can be denied even if you have successfully paid off a significant portion of your debt. That is why it is so important for your bankruptcy attorney to determine whether or not you truly have the resources to follow through with a payment plan if you choose to file for Chapter 13 bankruptcy. If you do not have the financial ability to realistically pay off some of your debts, your attorney will likely recommend Chapter 7 bankruptcy or a different debt relief option altogether.