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Types of Bankruptcy

Types of Bankruptcy

Bankruptcy is a procedure that is designed to relieve debt
to consumers who have fallen on hard financial times and
cannot afford to pay their existing debts.

While there are many types of bankruptcy out there, the
most commonplace are chapter 7 bankruptcies and chapter 13
bankruptcies of the bankruptcy code.

Chapter 7 is the most common for the individual. It is the
complete erasing of qualifying debt. The debtor is then
released from all repayment obligations. But chapter 7
bankruptcies are not to be taken lightly.

While giving you an immediate fresh start in repairing your
finances, it remains on your credit report for 10 years.
You will be looked at as a high credit risk and financially
irresponsible.

Chapter 13 is less harmful to your credit. Though there are
still marks against you, since you will be working to repay
your debts on a payment plan, you do not look like you are
financially irresponsible, though you are still considered
a slight credit risk. Also, your qualifying assets will not
be sold with the chapter 13 bankruptcy like they would in
the chapter 7.

In 2005 an act passed legislation that now makes it more
difficult for individuals to receive a chapter 7
bankruptcies. There are now terms to be followed such as
pre-filing credit counseling and post-filing financial
education.

So when considering your file for bankruptcy, it is
important to weigh the sides between chapter 7 and chapter
13. Which one will do you more harm than good when it comes
to solving your financial problems?

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