Millions of Americans file for debt relief through bankruptcy each year. The Bankruptcy Code was written to be a financial safety net for individuals who are facing mounting debt. Whether through job loss, reduction in hours, divorce or medical emergency, financial peril is usually only a few paychecks away. Fortunately, depending on your circumstances, you have numerous legal options.

#1: What happens to my debt?

Chapter 7 bankruptcy is often referred to as debt elimination or debt liquidation. Once you’ve completed all steps of the process, your unsecured debt is eliminated. Conversely, Chapter 13 is referred to as debt reorganization. Based on your income, you will be given a three year or five year repayment plan. Successfully completing your repayment plan results in the elimination of your unsecured debt.

#2: How often can I file?

Depending on your bankruptcy history, you might be eligible to file again should the need arise. If you filed for Chapter 7, you cannot file another Chapter 7 until eight years have passed. You cannot file a Chapter 13 if, in the last four years, you have filed Chapter 7, Chapter 11, or Chapter 12, or if you filed a Chapter 13 in the previous two years.

#3: How can I tell if I’m eligible?

To be eligible for a Chapter 7, a debtor must pass the means test. Essentially, the means test compares your income against the state median income. If you are not eligible for a Chapter 7, you are likely eligible for a Chapter 13. A bankruptcy attorney can carefully examine your finances and provide clear direction.


Filing for bankruptcy is a personal choice reliant on numerous factors. You should consider the types of debt you are facing, what property you would prefer to protect and what exemptions exist in your state. Before making this life-changing decision, it is wise to discuss the matter in detail with a lawyer experienced in these matters.

Source: American Bar, “General Comparison of Chapter 7 and Chapter 13 Bankruptcy.” Accessed 4/6/15.