As a credit card defense lawyer can explain, there are two primary forms of personal bankruptcy that people may file for: Chapter 7 (liquidations) or Chapter 13 (reorganizations). Bankruptcy gives a person the opportunity to relieve themselves of the debts they owe creditors when they are no longer able to afford to do so.
For a person to file Chapter 7 they must meet specific criteria. Those filing for Chapter 7 must be able to show that they have been through credit counseling and that their extra income every month is not enough to cover their debts. This is usually sorted out through a means test. In Chapter 7 bankruptcy, the majority of a person’s debts are discharged.
Chapter 13 bankruptcies usually provide a person with a payment plan in order to pay off the majority of their debts. This usually occurs over a three- to five-year span. Once this time has passed, the rest of the person’s debts are usually resolved. Chapter 13 is available to people who have a median income that is higher than that of their state. In these situations, it’s likely that they did not qualify for Chapter 7 due to their income.