The realization that you can’t pay for your normal bills and pay for other debts can be overwhelming. At that point, you have to determine how to handle this matter. One option you may consider is filing for bankruptcy.
Consumers have two primary options—Chapter 7 and Chapter 13. Each of these outlines a specific type of bankruptcy. Understanding the differences between these may be beneficial if you’re trying to determine which is most appropriate for your needs.
Chapter 7 bankruptcy
Chapter 7 bankruptcy is informally known as the liquidation bankruptcy. In order to file this type of bankruptcy, you have to pass the means test. You don’t have to make payments on the debt when you choose this option. Instead, the bankruptcy trustee can determine if the available non-exempt assets have enough value to warrant liquidation to pay off your debts. They can only access non-exempt assets, so you don’t have to worry about losing any exempt assets.
Chapter 13 bankruptcy
A Chapter 13 bankruptcy is known as the wage earners’ bankruptcy. If you file for this form of bankruptcy, you’ll make periodic payments to the bankruptcy trustee. The payments are divided among the creditors, depending on a specific order set by law. Once you make all the required payments, any remaining balance is removed, and your bankruptcy is discharged.
Filing for bankruptcy is a big step in protecting your financial future, so it’s critical that you understand exactly how it might impact you. Evaluating the options with someone who’s familiar with these matters is beneficial. This can help you to learn the options you have and make the decision that you feel is in your best interests.
