When Filing Bankruptcy Is the Best Option

2 Types of Bankruptcy and When You Should Consider Them

Filing bankruptcy is often a last resort for many individuals, mostly because they think that it is some kind of failure on their part. However, a bankruptcy is often the best option for people drowning in debt and having difficulty paying their debts. Below are just two bankruptcy types to consider, as well as when you should consider them.

Chapter 7

A chapter 7 bankruptcy is one of the most common types of bankruptcy, mostly because of the many benefits that it provides. In this type of bankruptcy filing, you can potentially end up with a clean slate after eliminating most of your debt types. However, debts such as legal judgements against you, child and spousal support, and money owed to the IRS for back taxes are not dischargeable in a bankruptcy filing.

This type of bankruptcy should be considered if your income has dropped to the point where you are struggling to make the minimum payments on your debts. In addition, you should consider this type of filing if you do not think that you will be able to pay off your debts in a reasonable amount of time.

Finally, you should be aware that this type of filing can result in the loss of some property, mostly because it will be used to pay back your creditors. Some of the property that you can expect to lose includes certain types of investments, a vehicle (if you have multiple vehicles), and any cash in your account on the day you filed for bankruptcy.

Chapter 13

A chapter 13 bankruptcy is a fantastic option if you are trying to deal with a lot of debt as well. This type of bankruptcy is going to require that you pay back your debts through a payment plan that is arranged by the bankruptcy court. This plan will see you paying less per month and lower the entire debt that you owe so that you can finish the payment plan within a few years.

The main reason to consider this type of bankruptcy is if you have some property that you owe money on and that you want to keep. For example, if you have a car payment or mortgage, the chapter 13 bankruptcy will allow you to keep the car or house because you will still be paying for it.

Speak to a bankruptcy lawyer like William C Fithian III in order to discuss which type of filing is right for you. A chapter 7 is ideal if you are looking for a clean slate, while a chapter 13 is perfect for you if you can afford to pay back a portion of your debt and do not want to surrender any property.