If you are dealing with financial issues, then something you may have considered is going into bankruptcy. Bankruptcy comes in a number of different forms, so the type of bankruptcy you choose may vary depending on the circumstances surrounding your case.
The two main kinds of consumer bankruptcy include Chapter 7 bankruptcy and Chapter 13 bankruptcy. These kinds of bankruptcy are different enough that you should learn more about them before you decide on the one that is right for you.
Chapter 7 bankruptcy
The first type of bankruptcy to consider is called Chapter 7 bankruptcy. This form of bankruptcy, also identified as liquidation bankruptcy, is usually used by those whose debts far outweigh their income. It helps you discharge many of your unsecured debts, too, like medical bills or credit card debt.
Chapter 7 bankruptcy is normally used when someone has no income or a very low income. There is a means test that must be passed. Once all the qualifications are met, then you can normally get your debts discharged within a few months.
If you cannot pass the means test because your income is too high, then you may prefer to use Chapter 13 bankruptcy.
Chapter 13 bankruptcy
Chapter 13 bankruptcy is better known as a wage-earner’s bankruptcy. Uniquely designed to consolidate your debts, this form of bankruptcy reduces your debt load by minimizing your monthly payment and then discharging any qualifying debts that remain after you pay on those debts for three to five years.
Chapter 13 bankruptcy is better for those who don’t qualify for Chapter 7 bankruptcy and those who have the means to pay down debt if they can get their monthly payments reduced.
Some people will only qualify for one kind of bankruptcy while others will qualify for both. It’s a good idea to sit down and go through the qualifiers for each kind of bankruptcy to see which kind you qualify for and to determine if it’s right for you. There are both positives and downsides to either kind of bankruptcy, so make sure you do your due diligence before selecting what will work for you.