Unless you've gone through it before, filing for bankruptcy can seem like rocket science. It definitely is a complex branch of law, yet it can be a life-saving tool for anyone who has a lot of debt. Bankruptcy is designed to help people struggling with debt, and there are two main branches of bankruptcy consumers use for help.

If you are in desperate need for relief from your debts, you should start by comparing the main three differences between Chapter 7 bankruptcy and Chapter 13.

Income: The Main Condition for Determining Which Branch You Qualify For

Chapter 7 is often considered the better form of bankruptcy; however, it is not always the best option for all financial situations. It's also important to realize that not everyone qualifies for Chapter 7.

To qualify for this branch of law, you must complete a means test, which is a test that compares the amount of money you earn to the average amount in your state. As long as your income is below the state's average, you qualify. If it's not, you will most likely qualify for Chapter 13.

When you meet with a bankruptcy attorney, he or she will most likely perform this test during your first appointment. The law office will let you know what documents to bring to prove your income, and you must bring these with if you want a definite answer.

If you qualify for Chapter7, you have the option to file either Chapter 7 or Chapter 13. If you do not qualify for Chapter 7, the only option you probably have is filing Chapter 13 bankruptcy.

Debts: The Way Each Branch Deals with Them

The main reason people often prefer Chapter 7 over Chapter 13 is the way it deals with debts. Any qualifying debts you have are forgiven with Chapter 7, which means you will never be required to pay these debts if you complete a Chapter 7 case. However, there are debts that are excluded from forgiveness in bankruptcy, such as child support payments.

Chapter 13 is a branch of law designed to restructure a person's debts. Debt restructure involves creating a unique payment plan for the filter. This plan lasts three to five years, and it requires repaying a certain percentage of all debts owed. You can typically include all types of debts into your payment plan, even debts that are excluded in Chapter 7 cases.

Assets: How the Law Handles the Things You Own

There is also a difference with the way each branch handles the assets you own.

For Chapter 7 cases, there is a greater chance the trustee will ask for some of your assets. This may seem like a downside to Chapter 7, and it is in some cases, but you should keep in mind that Chapter 7 discharges your debts. With Chapter 13, you have a reduced risk of losing assets you own, but you are required to repay your debts.

Both branches offer the potential for saving a house that is in the foreclosure process, too. This, however, is harder to do in Chapter 7 cases, unless the person is current on their mortgage payments.

Each branch of bankruptcy offers pros and cons, but there is always one branch that will be the right option for your situation.

Bankruptcy can drastically help improve your financial state if you are in desperate need of help for your debt load. If you live anywhere in the Pennsylvania area, the Law Offices of Paul McElrath can help answer your bankruptcy-related questions and can give you professional advice pertaining directly to your situation. To learn more, fill out our contact form.