There are different types of bankruptcy to help struggling consumers in different situations. Because of the help they can provide, struggling consumers considering bankruptcy should be familiar with the different personal bankruptcy options and how they can help them.
Chapter 7 bankruptcy
Chapter 7 bankruptcy is considered a liquidation bankruptcy which allows the filing party to sell, or liquidate, assets to repay creditors. Some types of property are exempt, or protected, from the process so filing parties should be familiar with what those exemptions are and how they work. To qualify for Chapter 7 bankruptcy, the filing party will have to meet the means test. The means test looks at monthly income and family size and is also important for filing parties to understand.
Chapter 13 bankruptcy
For filing parties who do not meet the means test requirements, they may qualify for Chapter 13 bankruptcy. Chapter 13 bankruptcy is considered a reorganization bankruptcy. It allows the filing party to reorganize their debts into a repayment plan they can repay over a period of time which usually makes repayment of the debts more manageable for the filing party. Chapter 13 bankruptcy is best for filing parties who have a reliable source of income to repay their debts with.
Personal bankruptcy protections can help those struggling with overwhelming debt who find themselves in different situations with potentially different needs and goals. Familiarity with the different options can help the filing party decide which is the best option to help them enjoy debt relief which both options can provide.
