By the time you have decided to file bankruptcy, you have most likely gotten inundated with calls and letters from debt collectors. About the only thing you know about bankruptcy is that it cuts off all contact between you and the folks trying to get you to pay them. When someone asks what type of bankruptcy you are filing for, you aren’t quite sure how to answer. Chapter 7 and Chapter 13 filings are the most common for individuals. Learn some key facts between the two so you can decide which one will work best in your situation.
Chapter 7 Bankruptcy
If you were to call a Rockville bankruptcy lawyer, they would tell you that Chapter 7 involves selling assets to pay debts. Under Chapter 7, a trustee is appointed by the court. This person is a neutral third-party who will go through your finances and decide what gets sold and what you get to keep. In most states, you can save a primary residence and vehicle if those payments are not being grouped in with the bankruptcy. The trustee then decides who gets paid. Even if the money you have cannot pay all of the debt, the court will order all further debt discharged.
Chapter 13 Bankruptcy
Under this filing, a trustee still reviews your debts and assets. However, this chapter is for restructuring payments and coming up with an amount you can pay every month towards your debt. Once a payment plan is established, you have three to five years. The timing is due in large part to your income and household size. Under Chapter 13, if you are behind in your mortgage or car payments, they may be included in the payment plan. After the payment plan is over and the terms fulfilled, all remaining debt is discharged.
Deciding which type of bankruptcy best suits your situation is the first step in regaining your financial foothold.