When someone is considering filing for bankruptcy, it is helpful to have information about the most common types filed by individuals, even if they have a small business. You may have heard of Chapter 7 and Chapter 13. Following is general information about these two types of bankrutpcy.
Chapter 7 is the most common form of bankruptcy filed. Once your case is filed, your creditors must stop all collection action including garnishments and phone calls. A Chapter 7 bankruptcy discharges most unsecured debt such as credit card bills, medical debts, and loans not backed by collateral, allowing you to receive a fresh start. Some debts are not gone after filing Chapter 7 including some income taxes, student loans, spousal and child support, and fraud debt. Most often people do not lose any of their property in Chapter 7 but this is an area you would want to discuss with an attorney as each case is unique.
Chapter 13 is designed for individuals with regular income who would like to pay a portion or all of their debts in installment payments over a period of three to five years. Frequently people who are behind on their house payments file a Chapter 13 to stop a foreclosure sale. Other reasons to file Chapter 13 include paying income taxes that would not go away in a Chapter 7 or paying what a vehicle is worth as opposed to what is owed on it. You and I figure out your budget and what you can afford to pay for your Chapter 13 payment. That payment will go to your creditors. Once your payments are complete, you receive your discharge.
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* This information is designed to give you a general knowledge of bankruptcy; however, each situation is unique and you will need to discuss your case with an attorney. The information presented at this web site should not be construed to be formal legal advice.