Effects of Bankruptcy
Bankruptcy is a serious thing. If you are thinking of claiming bankruptcy to address your financial concerns then it’s important to know about the two different types of personal bankruptcy that exist. Although many borrowers assume that there is only one type of filing for individuals, there are actually two types which are quite different from one another.
Because of this, it’s critical that borrowers formulate a plan to file under either Chapter 7 or Chapter 13. The following article will discuss the two types bankruptcies in general terms so that you can make the best decision for your individual situation.
Different Types of Bankruptcies
Deciding on the type of bankruptcy to file can be somewhat challenging, particularly if you don’t know much about the process to begin with. A bankruptcy attorney can supply you with specifics about the two most common types, though we can offer you a general breakdown.
If you’re like most debtors, then you will probably want to file under Chapter 7, which is commonly known as “liquidation” or “straight bankruptcy.” Under Chapter 7, a borrower uses their available assets to pay back their creditors through the liquidation process. Any remaining debt that hasn’t been addressed through liquidation is forgiven through the bankruptcy proceedings.
This form of bankruptcy is quite common, since most debtors don’t have many assets to risk in the first place; therefore, it’s essentially quick debt reduction strategy.
Chapter 13 Bankruptcy
Chapter 13 is quite different from Chapter 7 in that it essentially calls for the creation of a repayment plan where the debtor attempts to repay their accumulated debt over a 3-5 year period. Chapter 13 is an attractive option for individuals that wish to protect their assets. The downside is that qualification for Chapter 13 can be tough, as the debtor must demonstrate that they will be able to make regular payments.
For a more thorough explanation of the two most common types of bankruptcies and to find out more about some of the possible consequences that are associated with filing, consider contacting a qualified bankruptcy attorney or consultation group. The more information you have about bankruptcy the more likely you are to avoid making the wrong choice.
Always consider the advice of your financial advisor above all and get more than one opinion before committing to any contract or deal your provided with.