Kinlaw Cunningham And Ward, LLC



Choosing the Right Type of Bankruptcy

Choosing the Right Type of Bankruptcy

19 February

The type of bankruptcy that’s right for you will mostly be contingent on your assets and your income. Your income may preclude you from filing a simple Chapter 7 case, and if you have nonexempt property, you might lose it in a Chapter 7 bankruptcy, but it can protected with a Chapter 13 bankruptcy.

Below are a few common scenarios and which bankruptcy strategy would be best.

1. You are Unemployed with Debtors and only a Few Assets – Chapter 7
Being unemployed along with a large amount of debt is the most common reason people file for bankruptcy. Compounding factors like divorce and medical bills are also common. Assume you have no income other than unemployment benefits, you do not own your home, and have a car with a loan against it.

In cases like this, a Chapter 7 bankruptcy is the easiest, quickest and most effective way of eliminating your debt. This scenario is the most common bankruptcy case. It is often called a “no asset” bankruptcy.

2. You are an Unemployed Homeowner with an Upside-Down Mortgage – Chapter 7
If you are a homeowner and unemployed with no income you still have options under bankruptcy law. If your property value is less than the value of the loan against it, Chapter 7 is usually still the best option. Since the value of your home is less than the value of the lien against it, you have no equity in the bankruptcy estate, so the house is protected from liquidation. A Chapter 7 bankruptcy can quickly relieve you of your obligation to repay unsecured debts. This will make your monthly bills more manageable.

3. You are an Unemployed Homeowner with a Significant Amount of Equity – Chapter 7 or 13
If you are a homeowner and have a significant amount of equity in your home, then Chapter 7 may or may not be the best option. If your state exempts a generous amount of home equity, then the home might be safe. But if your state homestead exemption doesn’t cover the equity, you may lose your home in a Chapter 7 bankruptcy. You would be able to keep your home in Chapter 13 bankruptcy if you maintain current on your mortgage. However, keep in mind that you must have enough income available from your household to fund a repayment plan.

4. You are an Employed Homeowner and Facing Mortgage Delinquency or Foreclosure – Chapter 13
If you are a homeowners and you have fallen behind on your mortgage payments, Chapter 13 offers a way to catch up or “cure” your past due mortgage payments while simultaneously eliminating some portion of dischargeable debt. This means you can save your home from foreclosure and get rid of a lot of credit card debt, medical debt, and possibly even second and third mortgages. Chapter 7 bankruptcy does not provide a way for homeowners to make up mortgage arrears.

5. Wealthy Petitioners with a Large Amount of Debt – Chapter 11
If you are wealthy you may need to file under Chapter 11 due to the debt and income limits of Chapter 7 and Chapter 13 bankruptcies.

For more information on our bankruptcy services, give us a call at 864-399-7888 or click here for a FREE Consultation and we will discuss your case and review your options. You may also email us at or stop by our Simpsonville office at 120 S. Main Street – Suite B, Simpsonville, SC 29681.

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