Are you considering filing bankruptcy to get out from under your financial misery? If so, then there are a variety of things you need to consider including whether or not to seek help with your claim and which type of bankruptcy to file. For those that don’t already know, there are two major types of personal bankruptcy protection that troubled borrowers seek – Chapter 7 and Chapter 13. It’s important to note that there are major differences between the two types of bankruptcy, so it’s critical to have a general understanding of each type. The following article will cover the basics so that you can concentrate on moving forward with the repair process.
You’re probably well aware of the main advantages of claiming bankruptcy, though you probably aren’t very familiar with the two most common chapters as defined by the U.S. Bankruptcy Courts – Chapter 7 and Chapter 13. Listed below you will find a basic explanation of each type –
Chapter 7
This is the most common form of bankruptcy protection, as it allows debtors to completely eliminate large portions of their debt. Part of this process includes the liquidation of assets, which provides money to help pay down your debts. While this can be undesirable if you have valuable assets that you wish to retain, many debtors don’t have much to lose once they’ve reached the point of filing. Like all forms of bankruptcy, you must qualify before you can participate in the program. Qualification is based on a thorough examination of your assets, debts and household income.
Chapter 13
This is often referred to as “reorganization bankruptcy” because it allows borrowers to pay back their debts in a structured format and without risk to their assets. If you happen to have valuable assets that you wish to retain, then Chapter 13 is probably the right option for you. Qualifying for Chapter 13 is a bit more difficult that qualifying for Chapter 7, as you will need to show proof that you can pay back your debts under the structured payment option.
For more information on these two types of bankruptcy, consider consulting with a qualified financial professional or even a bankruptcy attorney. The right person can tell you what to expect from the process and can even assist you in document preparation if necessary.
