Written by San Francisco bankruptcy attorney, Jeena Cho

While bankruptcy is complicated, let’s break it down and look at the basics in order to form an understanding of the two most common forms of bankruptcy for individuals: Chapter 7 and Chapter 13.

A Chapter 7 bankruptcy is the more common of the two. There are two important analysis in Chapter 7.

1. Income

2. Assets

First, the income. If your income exceeds the state median, you must pass the “Means Test.”

Second, you run the risk of having your assets liquidated if it’s not exempt. Luckily, California has fairly generous exemptions, and in most cases, you can protect all of your assets.

In general, Chapter 7 is most appropriate for people who can pass the Means Test, and has no unexempt assets. Chapter 7 takes about 4 months from the date of filing until discharge (when your debts are forgiven).

A Chapter 13 bankruptcy, is a repayment plan allowing you to repay some or all of your debt for 3-5 years.

Let’s get two things straight here.

1. Amount of debt repaid is determined by greater of your “disposable income” or “liquidation value” of your unexempt property. Note that amount repaid is not determined by the amount of debt you have.

2. It is rare that you will be required to repay 100% of your debt! Chapter 13 is not a debt consolidation plan like Consumer Counseling.

Which bankruptcy is right for you? That’s a tough question, and one best discussed with a qualified San Francisco bankruptcy attorney.

Tagged as: Chapter 13, chapter 7, chapter 7 bankruptcy