The Types of Personal Bankruptcy

If you’re thinking about declaring bankruptcy, or you just want to know which each chapter is all about, I wanted to give you some pointers on what each bankruptcy does for you and how you can file.

Now, before you set out and file, you’re going to want to make sure that you really need to.  There are a lot of people out there that think they need to, but they come to find out that with a little hard work and motivation, they can pay off their bills relatively fast.

Chapter 7 Bankruptcy

Let’s start out with this first since it is the most common out of the two.  With Chapter 7, you will either have all of your debts discharged, or it may be partially.   The judge may force you to sell your assets to repay some of your older debts.

Once you declare Chapter 7, all of your older debt collectors may not contact you after the process has been done.  There are debts such as student loans and more that will never go away, so be sure to ask about these when consulting with an attorney.

How do I file?

You will find that the court system will make you take a means test first.  This test is going to show the judge that you really do qualify for filing.  If you don’t pass this test, they may reference you to Chapter 13.  If you pass, you will have to work with an approved counseling agency.

Chapter 13 Bankruptcy

This one is a little bit different than Chapter 7.  Under this process, you will have to repay all or even parts of your debts over a certain time period.  You and the courts will have to work out some sort of repayment plan.  You will pay the courts once approved and from there, they will pay your creditors.

The creditors are still going to get your money, but the judge is going to have the final say on what they are going to get.  When filing for Chapter 13, you will owe a lot less than you would before, but you will still have to pay over time to what the judge deems fair.

These are the 2 most common types.  If you find yourself in some financial trouble, be sure to meet with a bankruptcy attorney.  What you’re going to find is that they will be able to guide you on what’s best for you.

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