Different Types of Bankruptcy

TYPES OF BANKRUPTCIES

Have you determined if bankruptcy is a good or bad choice for you?

Once you decided that bankruptcy is a viable option, the next thing to consider is what type of bankruptcy you will file. There are two types of bankruptcies individuals may consider: Chapter 7, and Chapter 13.

**Remember that bankruptcy is going to negative impact your credit. Learn more about the effects of having bad credit.

Chapter 7:
Chapter 7 is the most common filing. It's quick, normally only taking four months from start to finish. It also costs much less than a Chapter 13. Best of all, it solves the financial problem, leaving you in no obligation to pay back your creditors.

Chapter 7 is great for those with a lot of unsecured debts, like credit cards. A chapter 13 forces you repay some of this money owed over a period of several years, whereas a Chapter 7 completely wipes out your debt.

Chapter 7 is also attractive because most states allow debtors to keep all of their property.

Chapter 13:
A chapter 13 is used only in very specific, limited circumstances. It is most often used to save a house from foreclosure. If you are behind on your mortgage, you cannot wipe out that debt in a Chapter 7. If you want to deal with your house debt in bankruptcy and still keep your house, the only way to catch up on your payments is through a Chapter 13 repayment plan.

A Chapter 13 repayment plan is basically a plan that lasts three to five years, depending on the circumstances. The debtor pays a certain amount of money each month to the Chapter 13 trustee, who, in turn pay back the debtor's creditors. Typically, secured creditors are repaid 100%, and unsecured creditors get pennies on the dollar.

You can get more information about the different types of bankruptcy from Free Advice.

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