If you are considering filing for bankruptcy in Minnesota, you may be wondering which type of bankruptcy is right for you: Chapter 7 or Chapter 13. Both options can provide debt relief, but they work in different ways. In this article, we will explain the differences between Chapter 7 and Chapter 13 bankruptcy so that you can make an informed decision about which is best for your situation.
Chapter 7 Bankruptcy in Minnesota
Chapter 7 bankruptcy is often referred to as “liquidation” bankruptcy because it involves selling off some of your assets to pay off your debts. However, Minnesota has certain exemptions that can protect some of your property from being sold. For example, you can typically keep your primary residence, personal property, retirement accounts, and some equity in a vehicle.
Chapter 7 bankruptcy can provide quick relief from overwhelming debt, as most unsecured debts (like credit card debt, medical bills, and personal loans) can be discharged within a few months of filing. However, certain debts like tax debt, student loans, and child support payments cannot be discharged in Chapter 7.
To qualify for Chapter 7 bankruptcy in Minnesota, you must pass a means test, which compares your income to the state median income. If your income is below the median, you may be eligible for Chapter 7. If your income is above the median, you may still be eligible if you can pass a more detailed means test that takes into account your expenses and other factors.
Chapter 13 Bankruptcy in Minnesota
Chapter 13 bankruptcy is a reorganization bankruptcy that involves creating a repayment plan to pay off some or all of your debts over a period of three to five years. Unlike Chapter 7, you typically don’t have to sell off any of your assets in Chapter 13. Instead, you make monthly payments to a trustee, who distributes the funds to your creditors.
Chapter 13 bankruptcy can be a good option if you have a regular income and want to keep your assets while paying off your debts over time. It can also be used to catch up on missed mortgage or car payments.
To qualify for Chapter 13 bankruptcy in Minnesota, you must have a regular income and your unsecured debts must be less than $419,275 and secured debts less than $1,257,850. You will also need to show that you can afford to make the monthly payments required under the repayment plan.
Which Option is Best for You?
The decision of whether to file for Chapter 7 or Chapter 13 bankruptcy will depend on your specific financial situation. If you have mostly unsecured debt and little income or assets, Chapter 7 may be the best option. If you have a regular income and want to keep your assets, Chapter 13 may be the better choice. However, there may be other factors to consider, such as tax debt, foreclosure, or wage garnishment, that could impact your decision.
Give Adam a call and he can help you evaluate your situation and provide personalized advice. With the right guidance, you can make an informed decision and move towards a fresh financial start.