Is Bankruptcy The Right Option for You?

Types Of Bankruptcy

There are two different types of bankruptcy that can be used in
most cases. Each one has a different set of rules and guidelines
that you must follow in order to qualify for and get the
bankruptcy. If you are considering bankruptcy, it is important
to understand the differences in these types of bankruptcy and
to choose the one that best fits your needs and the one that you
qualify for. 

Chapter 7 Bankruptcy

This is the type of bankruptcy that is most often used by
individual debtors. It allows for an individual or married
couple to wipe out their debt by taking property and liquidating
it. The money from the property is then used to pay off the debt
that the individual has incurred. In some states, certain
property can be retained. Only property that is exempt under the
bankruptcy laws is eligible. In most cases, it will be cars and
homes that are in good standing with their creditors. In some
states, you will lose your home. This is the fastest way to get
out of debt but one that is going to wipe you clean of assets.

Chapter 13 Bankruptcy

In this type of bankruptcy, the debtor and creditor work out a
plan that allows the debtor to pay off their debt in a payment
plan. Most of the time, this process will happen through the
paycheck of the individual. As long as the payment plan is in
effect, the creditor will not take your home or possessions and
you will not lose them. It is a good thing for those creditors
that would have lost more if a Chapter 7 were filled and a good
thing for the debtor because they can work on improving their
overall credit. 

Determining which type of bankruptcy is the right choice for you
is difficult. If you can afford to pay off the debt through a
Chapter 13, it is likely to do the least amount of damage to
your credit. A Chapter 7 will remain on your credit report for
up to ten years. Nonetheless, it is wise to talk to your
attorney about which type of bankruptcy is the right choice for
your needs.