Declaring bankruptcy is an emotionally difficult process. When you have insurmountable debt, it may seem like you have nowhere to turn and that debtors are out to get you.
However, declaring bankruptcy does not mean that you have failed financially as an adult. It is a chance for you to take a long, hard look at your spending habits, put to rest a portion of the debt you have and start anew with good financial practices.
Here is a guide to the two different types of bankruptcy, their benefits and pitfalls, as well as when each option that might be appropriate.
Chapter 7 Bankruptcy
Chapter 7 bankruptcies can eliminate debt by allowing you a fresh start. You can usually get rid of debt that includes medical bills, credit cards, personal loans, judgments due to accidents and more.
If you have been keeping up with your mortgage and/or car payment, Chapter 7 bankruptcy will typically allow you to keep these assets. You should also be able to keep most of your personal belongings with Chapter 7.
If debts are in your name rather than that of a spouse or family member, your loved one will usually not have to file for bankruptcy with you. However, this depends on the state that you live in, as well as whether or not your loved one is a co-signer on any of your debt.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is more commonly sought than Chapter 7. This sort of plan allows you to consolidate and repay your debts between a 3 and 5-year period.
Chapter 13 is typically only available if you have some sort of regular income as you would from a job. You have to be able to prove that you can afford your living expenses (such as rent) in addition to the monthly debt payments.
One benefit of Chapter 13 is that you can consolidate things that Chapter 7 bankruptcies often won’t allow, including student loans and mortgage arrears. Also, you can often save your home and car with Chapter 13, even if you have not been keeping up with payments for these assets.
- Filing Chapter 13 After Chapter 7 Discharge
Typically, someone who files for Chapter 7 can later file for Chapter 13 bankruptcy. However, this is only if you didn’t have another bankruptcy case dismissed within the past year.
With an experienced attorney, filing for bankruptcy can help you get back on your financial feet again.
Laura enjoys writing about many things. One of her favorites happens to be finances. If you’d like to learn more about Filing Chapter 13 After Chapter 7 Discharge