In bankruptcy, businesses and individuals can get rid of some or all of their debts, with the goal of starting fresh while treating creditors fairly. Individuals can file either Chapter 7 or Chapter 13 bankruptcy, and once a case is filed, creditors cannot make further collection attempts. Here, we will explain the two types of consumer bankruptcy.
Chapter 7
It is sometimes referred to as “liquidation bankruptcy” and the process starts when an individual files a petition with their local bankruptcy court. That petition must contain information on the individual’s financial situation, debts and property; after filing, a court appointed trustee determines which personal assets will be sold to pay creditors. Some types of property, such as vehicles, homes, insurance and retirement accounts are exempt–a local bankruptcy attorney knows state law concerning exemptions. Many debts are eliminated, but some remain, such as:
- Student loans
- Recent tax bills
- Child and spousal support
- Court costs and fines
Bankruptcy is official once all debts are eliminated or paid. Chapter 7 is best for those with intermittent income who cannot commit to a payment plan, and those with a substantial number of exempt assets.
Chapter 13
In Chapter 13 Chandler AZ, individuals can repay their debts over an extended period. The case begins when an individual files a petition detailing their assets and debts with the local bankruptcy court; the petition must also contain a repayment plan that lasts up to five years. A trustee reviews the repayment plan, and if it is approved, the individual makes a monthly payment that is disbursed to their creditors accordingly. Once the conditions of the payment plan are fulfilled, the case concludes. Chapter 13 is best for those who want to keep as many of their non-exempt assets as possible, and who have a steady income and the capability to repay their debts.
Hiring a Bankruptcy Lawyer
Regardless of which bankruptcy chapter an individual chooses, the legal process can be complex. Visit site to talk to an attorney who can advise you as to your state’s bankruptcy and exemption laws and recommend a specific chapter to file.
