An Overview On The Two Most Common Personal Bankruptcies
If you are having financial difficulties, deciding whether or not you should file for bankruptcy can certainly be a difficult choice. But the bottom line is that if you are truly having a hard time paying your bills, bankruptcy may be your only choice. It's not necessarily a bad thing to do, and in the end you could find yourself with a fresh, financial start. Here is an overview on the two most common types of bankruptcies. You will want to consult with a bankruptcy attorney for more information in order for you to make an informed decision.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is one in which you will not have to pay off your debt, as it will all but be eliminated. This is a good alternative if you have a lot of valuable assets, but you don't have a consistent monthly income.
With Chapter 7 bankruptcy, you will need to provide the court a listing of all your assets. Essentially, the court will allow you to keep some items, such as your vehicle, equipment and tools that you need for your job, some household furnishings and clothing, and the equity in your home.
Everything else of value, however, is fair game. Your court-appointed trustee will sell off your valuable assets in order to pay as much as you can on the debt that you owe. After your assets have been liquidated and the debt is paid (what you could pay on it), the debt is wiped clean and you can start over.
Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy proceeding, you will not lose your assets, because you will still be making monthly payments on your debt. You must be able to prove to the court that you have a consistent and steady income, and you will be required to have some of that income go to the trustee so they can make the necessary monthly payments on your debts. The benefits of Chapter 13 are that you will pay a lower monthly fee and perhaps even a lower monthly interest rate, so you won't find yourself struggling to make the necessary payments anymore.
The catch to Chapter 13 is that you will be required to take a credit counseling course at some point during the duration you're going through this restructuring. The court will not discharge the bankruptcy until you can provide proof you've taken the required course. A bankruptcy attorney is also vital to the success of your case.