Are your monthly bills more than your monthly income? Have you stopped paying on your credit cards so you can have money for basic necessities, such as gasoline, food, and housing? If your answer is yes, you may be considering bankruptcy as one of your solutions.

Before you file for bankruptcy, you should take a step back and carefully review all of your options. Is bankruptcy in your best interests? The answer depends on the types of debts you have, your income, and your goals. Read on to learn more about Chapter 7 and Chapter 13 bankruptcy.

Will bankruptcy improve your situation?

Before you decide what to do, consider how much debt you owe, what kinds of debts you have, and your income. Whether you file a Chapter 7 or 13, bankruptcy doesn't discharge all debts, only certain types of debts, otherwise known as "priority obligations."

For example, a debtor cannot discharge child support, spousal support, court-ordered fines and restitution, nor can it erase recent tax debts. If you're trying to discharge these types of debts, filing for bankruptcy may not be in your best interests.

Do you qualify for a Chapter 7 bankruptcy?

Through a Chapter 7, many types of unsecured debts can be discharged, such as credit card debts, medical bills, and personal loans. So, if a debtor has tens of thousands in medical and/or credit card debt, this type of bankruptcy can bring huge relief.

Chapter 7 is often people's first choice because it can wipe out many types of debts, however, not everyone qualifies. This bankruptcy is reserved for people whose income is below their state's median income for a household of their size.

If a debtor's income is too high for a Chapter 7, they will have to file a Chapter 13 instead. With a Chapter 13, the debtor enters a repayment plan that lasts 3 to 5 years. With a Chapter 13, the debtor pays off all or a portion of their debts based on their monthly disposable income.

To find out if bankruptcy is right for you, schedule a consultation with a local bankruptcy attorney!