If you are a California resident and feel you are drowning in overwhelming debt, you have the option to file for bankruptcy. Things like student loan debt, medical expenses, loss of a job or divorce can all hit out of the blue and make it hard to pay your bills. As you work toward a fresh financial start, there are two basic options to filing: Chapter 7 and Chapter 13.

Experian defines Chapter 7 as a liquidation bankruptcy available for business entities and individuals. There is a means test and your disposable income must meet that test. A typical discharge only takes three to five months and all nonexempt property can be sold to pay creditors. One of the main benefits of Chapter 7 is that debt is quickly discharged, and the filer can get a fresh start almost immediately. The downside of Chapter 7 is that there is no way to avoid repossession or foreclosure of most property.

Chapter 13 bankruptcy is known as a reorganization bankruptcy and is only available to individuals. There are limits on how much secured and unsecured debt you can have, and the debt is discharged once the planned payments are all made. This can take up to three to five years. You can keep your property but must pay an equal amount to creditors of any nonexempt assets. The benefit of Chapter 13 is that you can keep your property and get caught up on payments for your car, mortgage and any other nondischargeable debt. The downside is that monthly payments are required for several years and a portion of general unsecured debts must be paid back.

Every situation is unique, and it can be difficult to determine which type of bankruptcy is right for you. A bankruptcy attorney can help you wade through your finances and make the right choices for your future.

This is for educational purposes and should not be interpreted as legal advice.