Bankruptcy has become a taboo work for many households over the years. People often fear that they’ll be shunned and looked down upon if they even mention the word bankruptcy. But, bankruptcy may be the best thing for many households.
Bankruptcy is a process that can help people clear their name of many forms of debt. Individuals have several options when filing for bankruptcy: Chapter 7 and Chapter 13 bankruptcy. What’s the difference between these kinds of bankruptcy and what do they do? Here’s what you should know:
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is the most popular form of bankruptcy. This process wipes out most unsecured debts and allows people to obtain a fresh financial start.
You may have heard of something called “liquidation” bankruptcy. Liquidation bankruptcy is another name for Chapter 7 bankruptcy. That’s because some filers may have a few of their excess assets liquidated during this process — but the vast majority of people who qualify for Chapter 7 don’t have any excess assets. Much can be protected through specific exemptions that cover equity in a home, pension and car, among other things. Non-exempt assets may include a summer home, sports car or collections that have significant value.
What is Chapter 13 bankruptcy?
Chapter 13 bankruptcy is useful for people that can pay some off their assets with their disposable income. Chapter 13 bankruptcy reorganizes what debts a debtor has to pay off. Then, over several years (three to five), the bankruptcy trustee will oversee the process of distributing your payments. At the end of that period, any remaining debts that can be discharged will be.
Know your legal options
You can decide what bankruptcy plan works for you. It can help to reach out for legal help to understand your options.