Whether you recently lost a job or experienced a medical emergency, it might be difficult to keep up with the various bills and expenses. Thankfully, you can file for bankruptcy and get a fresh start. There are two options for individuals: Chapter 7 and Chapter 13. If you aren't familiar with these options, use the following guide to learn more.

Chapter 7

Chapter 7 allows some debts to be completely wiped out so that they don't have to be paid back. In some cases, this is done by liquidating assets — such as by auctioning off a house or car. You’ll need to pass a means test to qualify. This is done by comparing your income to the median income of other state residents.

For example, for households with three people in Colorado, the median annual income is $96,223. If your income is below this, you automatically qualify for Chapter 7. If your annual income is above, you'll need to show that the disposable monthly income — the money you have after paying for necessities — is too low to pay off your debts. You can do this by gathering all financial documents and using an up-to-date means test calculator.

In addition to passing the means test, you'll also need to prove that you haven't filed for Chapter 7 in the last eight years. You'll also need to show that you've been honest when detailing your assets.

Chapter 13

If you make too much money to qualify for Chapter 7, the courts believe you have enough income to pay back the debts over time. In this case, you can opt for Chapter 13 bankruptcy. However, you must not have filed for this option in the last six years.

For Chapter 13, you'll need to have up-to-date tax filings, show proof of employment, and earn an adequate income. Only individuals can file for this type of bankruptcy, not businesses. If you have too much debt, you might not qualify for this repayment plan. Currently, the limits are $1,257,850 in secured debt and $419,275 in unsecured debt.

This option suits those who can't meet their minimum payments but can still pay back their debts eventually. The trustee will establish a payment plan that lasts between three and five years. 

To learn more about filing for bankruptcy, reach out to Griner Legal of Lakewood, CO. Amy Griner has over 20 years of experience helping clients, and she's committed to offering top-tier legal representation at a reasonable cost. This firm provides reliable service and open communication at every step. To learn more, visit the website. Call (720) 690-5679 to schedule a consultation.