There are two primary types of bankruptcy available to consumers - Chapter 7 and Chapter 13.
By understanding the two types of personal bankruptcy, you can best decide if bankruptcy could help you.
For debtors who don’t own a lot of property but have a large amount of unsecured debt, such as credit cards, medical bills or payday loans, Chapter 7 bankruptcy may be an attractive option because many of these debts could be discharged, which means you no longer owe on them.
In order to be eligible to file this type of bankruptcy, debtors must pass a means test.
The means test establishes the fact that the debtor does not have the means to repay all of his or her debts.
Debtors who do not qualify to file Chapter 7 bankruptcy may find relief with Chapter 13 bankruptcy instead.
Chapter 7 bankruptcy is the type of bankruptcy that you may have heard called "liquidation." This is because any non-exempt assets that the debtor owns may be liquidated (sold) by the bankruptcy trustee to satisfy part of the debtor's unsecured debts.
Chapter 7 bankruptcy exemptions vary state to state, but generally, there are exemptions for some equity in a home, personal belongings and tools of trade. Many debtors who opt to file Chapter 7 bankruptcy don’t own any non-exempt assets, and therefore there is no liquidation.
Chapter 13 reorganization bankruptcy is typically the type of bankruptcy that may suit people who have experienced short-term financial hardships and just need some time and breathing room to catch up on debts.
For those who have been laid off from work, suffered an illness, own a home or experienced an unexpected expense, filing Chapter 13 bankruptcy may be a good option.
This type of bankruptcy may help debtors who have a regular income avoid foreclosure and repossession, while allowing them to work out a three to five year debt repayment plan to repay past due payments.
Learn more about the different types of bankruptcy and find out if filing Chapter 7 or Chapter 13 would be best for you by speaking with a local bankruptcy lawyer.
At Total Bankruptcy, we can quickly help you find a lawyer in your area. Simply call 877-349-1309 or fill out the below form and we’ll connect you with a bankruptcy lawyer near you who can explain bankruptcy laws in more detail.