Your assets, income and debts may help determine which bankruptcy type to file. If you own a home with significant equity, you may keep it by filing for a Chapter 13 bankruptcy, as noted by Kiplinger’s Personal Finance magazine.
You may also maintain ownership of your primary residence by filing for a Chapter 7 bankruptcy, but under certain conditions. If your mortgage payments are current and your home does not have much equity, a bankruptcy may allow you to protect it. Otherwise, you may need to use some of your home’s equity to pay your creditors.
How does paying my creditors relate to a bankruptcy filing?
Your income and whether you have the means to pay off some of your debts can determine which bankruptcy type fits your circumstances. With earnings greater than the median Pennsylvania household income, you may file for a Chapter 13, which resembles a payment plan. A trustee of the bankruptcy court may set up an affordable payment arrangement for up to five years. After making on-time payments for a predetermined time, the court may discharge any remaining debts.
To qualify for a Chapter 7 filing, your income must fall below Pennsylvania’s median household income. Liquidating assets, which may include your home’s equity, may provide sufficient funds to pay some of your creditors. The court may then discharge the remainder of your consumer debts.
What other assets may I keep after a bankruptcy?
Either petition generally allows you to keep some of your personal belongings and a vehicle. Your creditors may not, however, have access to the equity in most retirement plans, such as a pension fund or a 401(k).
An inventory of your assets may give you an idea of your ability to pay down your debts. If they lack sufficient value, the right bankruptcy filing may provide another option to move forward.