Bankruptcy is a legal process enabling individuals or businesses either to get rid of or to repay debt. If you are struggling with burdensome debt and considering bankruptcy, it’s important to become familiar with the bankruptcy process starting with the two most common forms of bankruptcy available to individuals: Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 bankruptcy
A Chapter 7 bankruptcy, sometimes called “fresh start” bankruptcy, wipes out certain debts, enabling individuals to start with a clean slate. In return, the bankruptcy court may require the debtor to liquidate certain assets to help pay creditors. Individuals who have significant debt and insufficient income may qualify for a Chapter 7 bankruptcy. The debt is usually discharged 60 to 90 days after filing for bankruptcy.
Chapter 13 bankruptcy
A Chapter 13 bankruptcy, sometimes called “wage earner’s” bankruptcy, does not require debtors to liquidate property. Instead, it enables individuals to reorganize their debt-establish a plan to repay creditors over time (three to five years). Individuals must have a regular source of income and cannot have too much debt to be eligible for a Chapter 13 bankruptcy. The debt is usually discharged when the payment plan is completed.
Chapter 7 or Chapter 13?
Do you qualify for Chapter 7 or Chapter 13 bankruptcy? That depends on your individual circumstances-your goals, your assets, your debts, your income and your expenses. For guidance in formulating a plan and navigating the bankruptcy process, it’s best to consult with an experienced bankruptcy attorney.