Living in financial turmoil can be stressful, particularly if you you’ve gone through every debt relief option without success. Perhaps the solution that’s left for you to consider is the personal bankruptcy process, which is meant to provide you with a way to get out of your debts when you can no longer make payments. Before rushing into a serious matter like bankruptcy, however, you need to first learn more about the process. This includes making a distinction between the different types of bankruptcy. The two most common types include Chapter 7 and Chapter 13 bankruptcy. Borrowers should decide which of these two routes would benefit their present situation. This article will highlight the differences between these two types of bankruptcy.
Before you go ahead and file a bankruptcy claim, you must first decide whether you want to go with Chapter 7 or Chapter 13 since both are different from one another. A little research on the process will help you to make a decision, although seeking the advice of a bankruptcy attorney or a financial professional may be a wiser on your part.
Chapter 7 Bankruptcy
This type of bankruptcy is sometimes termed as “liquidation bankruptcy” since borrower’s entire assets will be liquidated to help pay off accumulated debts. Any debt that’s not covered by the liquidation will be dismissed through court proceedings. Going through this type of bankruptcy will eliminate a large portion of your debts. Even if this type of bankruptcy comes with benefits, the debtor’s assets are at risk for liquidation.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is also called “reorganization bankruptcy”. This involves setting up a repayment scheme to allow the borrower to pay back his debts gradually. Chapter 13 is in some ways better than Chapter 7 since the borrower can keep his assets as long as regular payments are made. The payment scheme generally goes on for about 3-5 years. The drawback is that it is harder to gain approval for Chapter 13 since proof is needed to ascertain that the borrower can pay accordingly.
If you want to learn more about the different types of bankruptcy, try to seek the assistance of an attorney or a financial professional that deals with debt relief.