You have a lot of debt built up that you’re not sure how to deal with. You may have been able to pay it off slowly at first, but now it’s gotten out of hand.
So, what are your options to quickly rid yourself of your debt? Many people file for one of two types of bankruptcy: Chapter 7 or Chapter 13 bankruptcy. Here’s more you should know:
Also called liquidation bankruptcy, Chapter 7 bankruptcy allows debtors to quickly shave off some or all of their debt. This is a great way to relieve yourself of debt payments and hold off creditors from demanding payments. The only drawback, however, is that debtors may have to liquidate assets – but not everything they own. (Plus, the vast majority of people who qualify for Chapter 7 have little or no assets to lose.)
Many assets are non-exempt from liquidation bankruptcy such as a second home, a newer model car, boat or art collection. Yet, you’ll find many other assets are exempt from liquidation such as everyday clothing, tools for a profession or a standard used car.
Although Chapter 7 bankruptcy is commonly used, debtors also have the choice of going for a Chapter 13 bankruptcy if they have sufficient income to pay some of their debts through a reorganization plan or want to preserve some assets they might lose through Chapter 7.
Chapter 13 bankruptcy won’t immediately wipe away your debt, but may make it easier to pay off the debt you already have – and it is still a viable solution for many.
You shouldn’t jump the gun when planning your bankruptcy. You may need to reach out for legal help to better know your options.