Consumers in Pennsylvania who are in need of debt relief assistance may benefit from filing for bankruptcy, but they should understand the two primary forms of consumer bankruptcy – Chapter 7 and Chapter 13 – to make the right decision for their needs.

When facing serious debt problems, many consumers can feel stuck and as though they have nowhere to turn. They can be afraid to answer their phone, read their email or get their physical mail for fear of being hounded by yet another debt collector.

The thought of filing for bankruptcy can be hard for some Pennsylvania residents to swallow in part because it can be difficult to know which type of bankruptcy to file for. Understanding how a Chapter 7 bankruptcy works and how a Chapter 13 bankruptcy works can help a person make the right choice for their situation.

Bankruptcy basics

Both types of consumer bankruptcies, Chapter 7 and Chapter 13, allow debtors to retain some assets as both plans identify a threshold for exemptions and items valued below the set level may be kept out of the bankruptcy process.

Another important point to understand is that both bankruptcy plans will evaluate a consumer’s income and expenses. Any money left after basic living expenses are paid may be deemed to be discretionary income.

Consumers should also be aware that some debts are not dischargeable via bankruptcy. Credit Karma explains these include spousal and child support, and some taxes.

Chapter 7 overview

In a Chapter 7 bankruptcy, a person’s nonexempt assets may be seized and used to repay creditors. Debt relief from this type of bankruptcy is achieved relatively quickly once the filing has been made, often within a few months. Any debt included in a Chapter 7 plan is discharged.

Chapter 13 overview

A Chapter 13 bankruptcy does not automatically discharge all included debts. Instead, it is more like a structured repayment plan in which the debtor makes monthly payments to a trustee for 36 to 60 months. Those payments are used to repay at least some of the money owed to creditors.

A person must have sufficient disposable income to qualify for this type of plan. A Chapter 13 bankruptcy may also give a homeowner the ability to avoid losing their home, but it is important for them to know that their mortgage would not be part of their bankruptcy plan. They must be able to catch up on any past due amounts and remain current with mortgage payments going forward while they are also making their Chapter 13 monthly payments.

Legal help is recommended

People who need guidance on how to get the right level of help for their debt relief needs should contact an attorney who is experienced in consumer bankruptcy. This will allow Pennsylvania residents to make educated choices that are in their best interests.