Chapter 7 vs. Chapter 13 – Which is Best?

Depending on your financial situation, one type of bankruptcy may offer greater advantages than the other. A knowledgeable attorney can help you make the right decisions when considering bankruptcy in Boise and throughout Idaho.

Your bankruptcy decision may hinge on the type of debt you have. Except for nondischargeable debt, debt falls into two main categories — secured and unsecured debt. The U.S. Courts define secured debt as "debt backed by a mortgage, pledge of collateral, or other lien; debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans and tax liens.” By comparison, unsecured debt is not collateral-backed. Additionally, creditors typically cannot pursue property for collections. Idaho bankruptcy exemptions allow you to keep up to $100,000 of equity in your home, up to $7,000 in your car and provide allowances for other personal property. Based on the amount of equity you have in collateral that secures your debt, you may want avoid liquidating assets through Chapter 7. Filing for Chapter 13 bankruptcy allows you to continue paying on secured property over a three- or five-year period, generally with reduced or no interest. Chapter 13 is feasible when you have a steady income source to make payments.

With unsecured debt, such as credit card payments or medical bills, and when you do not own a home or have low home equity that makes your property exempt, filing for Chapter 7 bankruptcy may be to your advantage. Of course, you must meet income requirements for filing for Chapter 7. Chapter 7 bankruptcies resolve quickly, within a matter of months. When discussing bankruptcy with your lawyer in Boise, explain your finances in detail, including all assets and debts.

Gulstrom Henson & Petrie, P.C. can discuss your objectives and help you take the best approach to deal with debt.