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There Are 2 Kinds Of Personal Bankruptcy You May Qualify For

21 July 2023 by Yolanda Lane

When you are deeply in debt, you may feel like there is no way that you can manage to get out of it. One way to deal with it is to file for bankruptcy. There are two different forms of personal bankruptcy, and you may not be sure which one you should choose. The best way to figure that out is to work with an attorney specializing in bankruptcy law because they can tell you what form of bankruptcy you should file for. So, what are the two kinds of personal bankruptcy? 

Chapter 7

This form of bankruptcy is often called liquidation bankruptcy. Part of the reason that Chapter 7 is called liquidation is that certain assets are sold so that you can repay your creditors. Some of your assets will be protected from the liquidation process. You can file this kind of bankruptcy even if you don't have a lot of assets, depending on your situation. When you file Chapter 7 bankruptcy, the court appoints a trustee to oversee your case. They are in charge of evaluating your assets and what kind of equity you may have. They will check to see if any of your assets will make a dent in your debt and handle the situation from there. The trustee will also set up a meeting with your creditors to discuss repayment issues. The meeting has to be set up before your bankruptcy can be approved. After the judge OKs your bankruptcy, your debts, except for some that meet certain requirements, will be discharged, and you can no longer be hassled about them. 

Chapter 13

Chapter 13 is often called reorganization. With Chapter 13, a new repayment plan is set up instead of liquidating assets to pay off at least a portion of your debts. If your house is being foreclosed on or your vehicles are being repossessed, filing for Chapter 13 can stop those actions and give you a chance to pay off your debts and loans at a repayment level that will work better for you. The repayment plans are generally set up for around five years, and once you have done everything required in your plan, your debts will be discharged. 

If you need to file bankruptcy, you need an attorney to help you. They will be able to tell you what kind of bankruptcy you should file and help you go to court and deal with trustees and creditors.   

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