When it comes to available bankruptcy types for individual debtors, it is possible to choose between Chapter 13 and Chapter 7. Basically, each one has its benefits and flaws. You need to consider them before filing your bankruptcy petition to determine the most suitable one for your financial situation. You can click here to get more information about each type.
- Chapter 7. This form is quite widespread these days, and it is called liquidation or straight bankruptcy. This is when your non-exempt assets will be liquidated to pay back your creditors. They are taken by a trustee to distribute the money earned to credit companies. As soon as you file your bankruptcy petition, you are not allowed to sell your possessions, and credit companies can’t take them directly from you. The rest of your debts will be canceled after this liquidation process, so that you won’t be responsible for them any longer. Keep in mind that there are certain debts that can’t be discharged when dealing with Chapter 7 bankruptcy. They include child support and spousal alimony payments, drunk driving fees, criminal fines, taxes, and so on.
- Chapter 13. It is all about reorganizing your debts and sticking to a pre-determined repayment schedule. This bankruptcy can’t last longer than 5 years. The good news is that you won’t have to pay high interest rates. You are allowed to repay only a certain percentage of what you owe. Everything depends on the nature of your debts, regular income, and other specific circumstances. There are certain debts that must be paid in full when filing for Chapter 13 bankruptcy. They include the above-mentioned categories and student loans.
There are different reasons why you should consider Chapter 7. It is an effective debt solution if you can’t pay off your debts. This is how you can protect your exempt assets. You need to pass the means test to prove that you are eligible for this bankruptcy type.
Many debtors decide on Chapter 13. If you have filed for Chapter 7 bankruptcy in the last six years, it is your only available option. You think that you can pay back your debts within five years. You want to get some relief from debt collection proceedings and lawsuits. It is worth saving your valuable assets, such as real estate. You should talk to your legal representative before making a final choice. Ask relevant questions to choose the best one.