Deciding to apply for bankruptcy is a significant decision. Bankruptcy can free a person from financial struggles and grant them the ability to clean their slate. The decision to apply for bankruptcy is a big decision, but it is not the only one someone needs to decide.
Chapter 7 and Chapter 13 bankruptcy are both bankruptcy options with very different outcomes when it comes to debt discharge. Filing for bankruptcy is more common than people expect. The year after a job loss, a household is two and a half times more likely to go bankrupt. When someone needs to choose between bankruptcies, they need to know what they are choosing.
Chapter 7 bankruptcy might be what most people think about when they imagine going bankrupt, mostly. People commonly imagine bankruptcy as losing everything, but that is not the actual truth. Chapter 7 bankruptcy discharges the unsecured debt, but first, the applicant will have to sell any non-essential assets, like a second home, heirlooms, and collectibles. While an applicant does need to sell some things, they certainly do not lose everything. The money from the sale goes towards the debt, and bankruptcy discharges the remaining debt.
Unlike Chapter 7 bankruptcy, this option does not require any sale of personal assets. Instead, Chapter 13 restructures the applicant’s debt. It organizes the unsecured debt into as few payments as possible and puts them on a payment plan that lasts between three and five years. After the debtor makes all of these new monthly payments, Chapter 13 bankruptcy will discharge the remaining debt.
Consider your options
Bankruptcy can offer someone a quick way to eliminate overwhelming financial debt in exchange for financial freedom, or it can allow someone to take control over their debt, pay a fair share of it, and eliminate the rest. Some options are more suited for certain applicants, so if you are looking to begin pursuing bankruptcy, consult with an experienced bankruptcy attorney today.