Are you considering bankruptcy? If so, you’re probably wondering which type of bankruptcy is right for you. There are several different types, and each has its advantages and disadvantages.
We’ll look at the different types of bankruptcy to help you decide which is right for your situation.
Understanding the different types of bankruptcy
Bankruptcy is a term used to describe the legal process of debtors seeking relief from their creditors. It’s an often overwhelming situation, but understanding the different types of bankruptcy can help bring peace of mind.
Chapter 7 Bankruptcy is called a “liquidation” bankruptcy, where you essentially relinquish all non-exempt assets to satisfy creditors and eliminate certain unsecured debts such as medical bills, credit card balances and personal loans. One pro of this option is that it discharges debts quickly. Its major “cons” are that debtors must meet a certain financial threshold to qualify. If your income is too great or you have extraneous assets you want to protect, it may not be the best option.
Alternatively, Chapter 13 Bankruptcy is a reorganization type of bankruptcy in which debt repayment plans can be enacted over 3 to 5 years, typically reducing debt amounts through repayment programs. Pros include avoiding asset forfeiture and the elimination of many remaining debts upon completion of the repayment plan. The major con is that you remain “in bankruptcy” for several years until the repayment plan is complete.
Now that you have a better understanding of the different types of bankruptcy and their pros and cons, you can make an informed decision about what is best for your unique financial situation. If you need more help after doing your research, consider talking to someone who understands bankruptcy proceedings. They can provide personalized guidance and answer any questions you may have.