Many people have debt, such as credit card debt, loans and medical bills. There are numerous reasons for people to struggle to pay off their debts. Unemployment can make it harder to pay off these financial obligations. Many people also don’t have savings to help them through their debt. Some debts can be hard to pay off because of late fees and high-interest rates.
One way to resolve debt is by filing for bankruptcy. Bankruptcy is a process that allows debtors to resolve their debt obligations. There are two popular forms of bankruptcy: Chapter 7 and Chapter 13 bankruptcy. Here’s how to know which one you may need to file:
Is there no other way to settle your debt?
Chapter 7 bankruptcy is a quick and easy form of debt relief. A successful Chapter 7 bankruptcy filing can resolve many forms of debt. The process is also called liquidation bankruptcy because the filer’s assets and finances are reviewed. Nonexempt assets may be seized to pay creditors. Nonexempt assets can include a second home, jewelry collection, sports car or art. However, most filers don’t have to worry about their assets being taken since many of them may be exempt, such as a used car or first home.
Are you still making payments on your debt?
Some people may afford to make regular payments on their debts, however, it may cause some financial difficulties for debtors. Chapter 13 bankruptcy can be filed to restructure the debts. Debtors are placed on a repayment plan. After three to five years, any remaining debts will be discharged if the debtor keeps making regular payments.
There are many pros and cons when filing for bankruptcy. You may need to talk with someone who has legal experience to know which form of bankruptcy is right for you.
