Bankruptcy can be an incredibly scary proposition. However, it is important that you educate yourself about the different types of bankruptcy so that you can figure out which option is best for you. If you are filing for personal bankruptcy, then your two main options are known as Chapter 7 and Chapter 13.
What is Chapter 7 Bankruptcy?
If you don't make enough money to pay back your debts over the course of several years, yet have some personal assets, then your best bet might be Chapter 7 Bankruptcy. Chapter 7 is also referred to as liquidation since it mostly revolves around liquidating your assets to partially pay off your debts. As with most forms of bankruptcy, the court will appoint a trustee to personally oversee your case. The job of the trustee is to make sure that your creditors get as much of their money back as possible and that your assets are accurately evaluated.
Firstly, the trustee will talk to you and your creditors. They will then take a detailed inventory of your assets and determine which are to be liquidated. You will be allowed to keep some critical assets, such as some small amount of money and a family car. Your other assets will be sold off and the proceeds will go towards your debts. At the end of the process, most of your debts will be resolved. However, it is important to understand that not all debts (like student loans) can be absolved through Chapter 7.
What is Chapter 13 Bankruptcy?
If you do make enough money to reasonably pay off your debts in several years, but are unprepared to handle interest in the meantime, then Chapter 13 is a better option for you. In a Chapter 13 Bankruptcy, you will renegotiate all of your debts into a single debt. Like in Chapter 7's, a trustee will be appointed to watch over your case.
This trustee will arrange a meeting between you and your creditors to plan out the specifics of the repayment plan. This includes both the amount of time that the plan will take (several years is normal) and how much money will be paid in each monthly or semimonthly installment. From this point forward, you will make payments to your trustee. The trustee will then distribute the money to your creditors. Ultimately, this functions somewhat like a debt consolidation and can greatly reduce the amount of money that you pay in interest.
Contact a bankruptcy firm like Miller Law LLC for more help and information about filing for personal bankruptcy.
Share13 October 2015
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