Depending on your financial circumstances, Chapter 7 or Chapter 13 may be the more appropriate bankruptcy option. The long-term effect bankruptcy may have on your credit is often a concern when weighing the available options. 

When coming to a decision on the bankruptcy option that works for you, it is important to understand the eligibility requirements and processes for each type of bankruptcy as it may be useful for making a final decision on the right option to help you find relief from your debt. 

Chapter 7 eligibility  

To be eligible for Chapter 7 you need to prove you are unable to pay your debts and pass a means test, which reviews income, expenses and debt to determine if you qualify. 

You may meet the qualification if the following factors are representative of your financial state: 

  • You have almost no disposable income 
  • You have an income that is less than the median in Massachusetts 
  • Your debts equal more than your annual income 

This method may be useful for preventing debt collectors from contacting you or pursuing a lawsuit against you for payment; however, you may lose any property or assets you have with this bankruptcy method. 

Chapter 13 eligibility 

For Chapter 13 eligibility, you need to have enough income to pay some of your debts and request forgiveness of other debts. Other important qualifications include having $394,725 in unsecured debt and $1,184,200 in secured debt. 

This may be a preferred option if you own a home. Through this bankruptcy method, you may be able to suspend foreclosure proceedings and keep your home. This process usually requires forming a monthly repayment plan that you distribute to the creditors included in the plan. 

Length of time on public record 

The process of a Chapter 7 bankruptcy lasts approximately 90 to 100 days to complete, while a Chapter 13 bankruptcy stays a more extended period of three to five years. However, Chapter 7 stays on your credit report for a span of 10 years after completion, while Chapter 13 stays on the record for only 7 years, because of the partial debt repayment.