It can be difficult to get finances back on track when debts are piling up. Oregon consumers have options to reduce or eliminate debts, including negotiating with creditors or filing for bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code. The type of bankruptcy they should file for depends on their particular financial situation and their goals for the process. In many cases, the rules will determine which type of filing to make.

Chapter 7 bankruptcy, sometimes called liquidation bankruptcy, discharges most unsecured debts. The first step in a Chapter 7 case is passing the means test. The means test is a comparison of the person’s income with the median annual income in the state. If the person’s income is less than the state median income, the means test is passed and he or she may file under Chapter 7. If the person’s income exceeds the state median income, it may still be possible for him or her to file Chapter 7 bankruptcy but not in all cases.

Chapter 13 bankruptcy, sometimes called reorganization bankruptcy, is ideal for people who have a regular income of more than the state median income. As part of the Chapter 13 process, the petitioner submits a repayment plan designed to pay off as much debt as possible over a period of three or five years.

People who are overwhelmed by their financial obligations might benefit from having legal advice. An attorney who has experience handling Chapter 7 or Chapter 13 bankruptcy cases might be able to help by advising them regarding which type of bankruptcy is applicable to their particular case. There might be other forms of debt relief that are available and that the attorney can describe.