If you're overwhelmed by debt, bankruptcy might be the solution to help you regain control of your finances. In Rhode Island, the two most common types of bankruptcy are Chapter 7 and Chapter 13. Choosing the right option depends on your financial situation. At the Law Office of Steven J. Hart, we help clients understand their options. Here's a brief comparison to guide you through the decision.
What Is Chapter 7 Bankruptcy?
Chapter 7, also known as "liquidation bankruptcy," allows individuals to discharge most unsecured debts, such as credit cards, medical bills, and personal loans. It’s best for those with little disposable income who can’t make debt payments.
Key Features:
- Quick Process: Typically 3-6 months.
- Debt Discharge: Most unsecured debts are eliminated.
- Asset Liquidation: Some non-exempt assets may be sold, but Rhode Island exemptions can protect essentials like your home and car.
Best For:
- Those with limited income and mostly unsecured debt.
- Individuals seeking fast debt relief.
What Is Chapter 13 Bankruptcy?
Chapter 13 reorganizes debt into a 3-5 year repayment plan, allowing you to keep your assets and catch up on secured debts like mortgages and car loans.
Key Features:
- Repayment Plan: Allows for debt repayment over several years.
- Asset Protection: You keep all your assets, including your home and car.
- Secured Debt Management: Helps stop foreclosure or repossession by allowing you to catch up on missed payments.
Best For:
- Individuals with a steady income.
- Those behind on secured debts who want to protect their assets.
Which Bankruptcy Is Right for You?
Feature | Chapter 7 | Chapter 13 |
Eligibility | Income below a set threshold | Steady income required |
Debt Discharge | Most unsecured debts eliminated | Some debts reduced, others paid |
Repayment Plan | No repayment plan | 3-5 year plan |
Asset Protection | Non-exempt assets may be sold | Assets protected |
Foreclosure Protection | Limited | Can stop foreclosure |
Making the Choice
- Do you have mostly unsecured debt? Chapter 7 may be better.
- Can you afford monthly payments? Chapter 13 could help you reorganize your debts.
- Are you facing foreclosure? Chapter 13 provides time to catch up on missed payments.
Conclusion
Both Chapter 7 and Chapter 13 offer debt relief, but choosing the right option depends on your specific circumstances. If you're uncertain, the Law Office of Steven J. Hart can help. Contact us today for a free consultation and take the first step toward financial recovery.