Bankruptcy is a federally protected program for consumers and businesses to either eliminate their debt or pay back their creditors. Bankruptcy typically falls into two categories: liquidation or reorganization.
Learn more about Chapter 7 and Chapter 13 Bankruptcies:
A Chapter 7 bankruptcy is the most frequently filed bankruptcy in the United States. Chapter 7 bankruptcy centers around helping those with debt who have little to no income to pay back to their creditors. Individuals who are unable to pay their bills can file and essentially walk away from their debts to receive a fresh start. Businesses can also file for Chapter 7 bankruptcy to liquidate and terminate their operations.
A Chapter 7 bankruptcy is a basic liquidation of an individual’s property for the purpose of repaying creditors and getting rid of any remaining debts. Many debtors think all of their assets will be taken, but that is not true. The only time you really lose assets is if they are worth far more than you may owe on them, they are not exempt, and you do not want to pay to keep them. Read more about chapter 7 bankruptcy here.
Chapter 13 Bankruptcy is best suited for individuals who have a steady income and property that they may want to hang on to. Under a Chapter 13 bankruptcy, you will be able to keep your property, but will have to prepare a payment plan to repay all or some of your debts within a 3 to 5 year period. Essentially, you will be reorganizing your debt into debts that will be paid and debts that will be discharged. In exchange for paying some of your debts, there are some important benefits the Bankruptcy Code provides to you, which makes this a very important bankruptcy.
A Chapter 13 can sometimes allow you to reduce what you pay for your car, reduce your interest rates on your car, reduce some tax liabilities, including tax penalties, and at times it will allow you to remove a second mortgage from your residence. Read more about Chapter 13 bankruptcy here.