With the increase of prices in everything from cars to college, the need for loans has increased immensely in the past years. This can in turn lead to a rise in the amount of debt for individuals, leaving some with too much debt to handle. When this happens, filing for bankruptcy can be the best option. It is a confusing and scary process, involving loads of paperwork and decisions that have to be made. One of these decisions is whether to file for either Chapter 7 or Chapter 13 bankruptcy, two options for personal bankruptcy. Understanding the difference between these two can, however, make the decision easier.
Chapter 7 bankruptcy is also known as liquidation bankruptcy. According to the website of Gagnon, Peacock, & Vereeke, P.C., chapter 7 bankruptcy involves canceling out all debts by liquidating some of your property in order to pay creditors. This can include a second car or home. This is typically the option for those who have little or no disposable income. The process takes around 3-5 months and can be extremely difficult to deal with. However, it has the benefit of completely wiping out unsecured debt and including credit card debt, according to information on the Greenway Law, LLC website.
Chapter 13 bankruptcy is also known as “wage earner’s bankruptcy,” according to the website of Erin B. Shank, PC. This is designed for people who have regular income and simply extends the period of time in which they can pay back their debts or reduces payment amounts. While it does not completely wipe out debt, it can help you make payments in a more reasonable manner.
Bankruptcy is something that many people do not think they will ever have to turn to. However, filing for bankruptcy can often be the most viable option for those looking to get back on their feet and can be the start to a new financial future for many.