Nobody wants to declare bankruptcy, but when you can’t get out from being under financially, bankruptcy is often the best solution. Once you’ve decided to take this step, the next decision is which type of bankruptcy to file. Each type is designed to offer specific remedies for specific circumstances. Learn more about what type is best for you and walk into your bankruptcy lawyer’s office prepared.
What is Bankruptcy?
Bankruptcy is best described as a legal process in which people who can’t repay debts to creditors can get relief from most or all of their debt. There are many circumstances in which talking to a bankruptcy lawyer and filing makes sense. Some of the top reasons include the following:
- Your creditors are suing for payment of debts
- Your home is in danger of foreclosure
- You routinely use one credit card to pay off another
All of the above are signs that a bankruptcy may be the best choice to prevent further financial ruin, but which type of bankruptcy is right for you? There are two basic types of bankruptcy. Keep reading to learn more about them.
Chapter 7 Bankruptcy
One of the most common types of filings is a Chapter 7 bankruptcy. Taking about three or four months to finish, this bankruptcy will discharge most types of unsecured debt. This type usually allows you to keep most or all of your property and can even temporarily halt a foreclosure. Chapter 7 is generally available to people with income that is less than the median of their state. In general, this type of bankruptcy is ideal for debtors with few assets and little or no employment.
Chapter 13 Bankruptcy
This type of bankruptcy is a little longer-lasting and has some benefits over Chapter 7. In a Chapter 13 bankruptcy, you repay creditors via a repayment plan that can last from three to five years. In exchange, you get to keep all of your property. This type of filing will also completely stop a foreclosure and help you make up missed payments. For this reason, a Chapter 13 is ideal for debtors who are employed, yet face mortgage delinquency.
There are other types of bankruptcies designed for businesses or very specific cases, but these are generally the most common two. Needing to file for bankruptcy can be disappointing, but it can give you the fresh start you deserve. Talk to a bankruptcy lawyer, like a bankruptcy lawyer in Memphis, TN, to learn more about how to start the bankruptcy filing process.
Thanks to Darrell Castle and Associates, PLLC, for their insight into filing for Chapter 7 and Chapter 13 bankruptcy.