What are your options in bankruptcy?

If you feel overwhelmed by debt, it may be time to consider a bankruptcy. The idea of filing for bankruptcy is finally getting out from under a long shadow of social stigma, and this shift in public opinion couldn't come at a better time for many Americans.

Bankruptcy is not a way to cheat those to whom you owe money, it is a legally protected right that the government retains. Through the power of the courts, you may be able to reduce your debt to a more manageable figure, or possibly discharge all of it for pennies on the dollar.

For consumers in America, bankruptcy comes in two distinct forms — Chapter 7 and Chapter 13. It is important to know that not all individuals qualify for both kinds of bankruptcy. Both are complicated processes with many opportunities for setbacks. If you attempt to pursue a bankruptcy without proper understanding of the specific requirements and timelines, you may land yourself in a more complicated mess than you were in to begin with.

In most cases, it is wise to enlist the help of an attorney in your area with years of experience walking individuals through bankruptcy. Proper legal counsel allows you to relax and focus on doing your part, while the attorney can protect your rights and ensure that you don't miss out on important benefits of the bankruptcy you choose.

Chapter 7 or Chapter 13?

These two types of bankruptcy operate differently, so before you choose one over the other, it is wise to understand the basics of how they work.

Under a Chapter 7 liquidation, a debtor gives up many of his or her possessions and a trustee sells them to pay a portion of the debt that the debtor owes. However, the debtor does not generally have to forfeit all of his or her possessions. While the specifics vary from state to state, Chapter 7 bankruptcies offer many exemptions for certain kinds of property.

Chapter 7 is often used by individuals who do not have incomes above the median income in the state and who have little or no disposable income to put toward debt. Chapter 7 bankruptcies are also fairly quick, at least in legal terms. A court may issue a debt discharge order in as little as three weeks after the debtor files under Chapter 7.

On the other hand, a Chapter 13 repayment plan allows a debtor who has a dependable income to create a court-approved structure for repaying debt at a manageable pace over time. This type of bankruptcy allows a person to both pay off and discharge debt while still keeping most or all of his or her property.

As soon as a person files for relief under Chapter 13, it orders creditors to suspend all collections tactics. This can help a person catch his or her breath and repay many debts over time, usually lasting between three and five years.

Get the help you need to rebuild

Bankruptcy is a powerful tool, but is only useful if you take action. Don't hesitate to reach out to an experienced attorney who can explain your options and guide you through this difficult season while you create a fresh start and rebuild your life.

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