Posted on: 19 November 2015
If you are an individual that is considering bankruptcy, then there are a couple of different types that you should mainly be concerned with. Here is a brief overview of each, how they work, and in which cases they are good choices:
Chapter 7 Bankruptcy
First of all, you have Chapter 7, which is probably what most people think about when they hear the term "bankruptcy." Chapter 7 is also known as liquidation, since it revolves around the sale of your belongings in order to partially pay off your debt.
After you initially file for Chapter 7 bankruptcy, a trustee will be appointed by the court to oversee your case. This trustee will ultimately be responsible for analyzing the value of your belongings, selling them off, and using the proceeds to pay your creditors some of the money that they are owed.
However, before all of that, the trustee will need to oversee a meeting of creditors. At this meeting, the creditors, the debtor, and the trustee will all discuss the specifics of the case and how it will proceed. It is important to note that some assets are exempt from the liquidation and may be kept by you. This usually includes a car, some money, and other things that are required for you to work and survive.
Chapter 13 Bankruptcy
On the other hand, Chapter 13's are repayment plans, which means that they are more concerned with setting up a concrete system in which you can pay off your debts.
Like in Chapter 7's, a trustee will oversee your case. Together with your creditors, they will help you arrange a system of payments that you will make, either once or twice a month. You will pay this money to your trustee, who will then distribute the money to your creditors.
If you do make money and have a steady income, then a Chapter 13 will likely be a better option for you. You will get to keep all of your belongings and will get a much more manageable interest rate than you might have had on the original debts.
Debt Elimination and Credit Score
At the end of the process, most debts will be eliminated. However, some debts (such as student loans) persist through bankruptcy, so you should make sure that your debts will be eliminated before proceeding. Bankruptcies will remain on your credit score for a while, but they do not last forever, and will usually be removed in under 10 years.
To learn more about bankruptcy law, contact a law firm like Anthony Inserra Attorney at Law.Share