Chapter 7 bankruptcy and Chapter 13 personal bankruptcy provide different varieties of protection.  If you’re facing a fiscal crisis, a neighborhood personal bankruptcy law firms can help you figure out whether or not Chapter 7 bankruptcy or Chapter 13 bankruptcy might be the proper solution for you.

Commonly speaking, Chapter 7 bankruptcy is meant to wipe the slate clear by discharging unsecured financial debt—money owed like credit credit card debt, healthcare charges, and unsecured homeowner loans.  Chapter 13 personal bankruptcy, on the other hand , is intended to give a debtor time to catch up past due repayments over a time period of 3-5 years, whilst preserving guaranteed possesions such as homes and cars .

What is Personal bankruptcy

There are two types of consumer bankruptcy.  Each is meant to help consumers in economic crisis, but the remedies provided are very distinct.

Chapter 7 personal bankruptcy, or liquidation, is much more prevalent.  Chapter 7 personal bankruptcy was intended to eliminate a lot of unsecured personal debt (credit cards, medical expenses, old power payments, unsecured private homeowner loans, and so forth), and can typically be finished inside only a few months.  In a Chapter 7 personal bankruptcy case, the trustee can liquidate (sell) non-exempt assets to pay creditors, but most people who file for Chapter 7 bankruptcy don’t possess any non-exempt assets, and so are able to keep their possesions while eliminating unsecured bad debts.

Chapter 13 personal bankruptcy is usually the solution of choice for individuals who have a number of secured consumer debt, like car financial loans and mortgages, and desire to preserve the house that serves as security for the financial loans.  In a Chapter 13 case, the borrower enters into a reimbursement program that will allow 3-5 years to catch up on over due repayments.

Because the chapter 7 law modification in 2005, there have been a lot of misunderstandings about chapter 7.  For instance, quite a few folks have been led to feel that nearly no one can apply for Chapter 7 bankruptcy anymore. That’s simply not true.  Though the new bankruptcy law that went into effect in October, 2005 added some hoops for borrowers to jump through, personal bankruptcy attorneys and credit counseling agencies have discovered from the beginning that the Chapter 7 means check really prevents extremely few borrowers from applying under Chapter 7.  In truth, some credit counseling companies have mentioned that by the time a lot of debtors come to them for the newly-required pre-filing credit guidance, they have no other realistic option!  The security net of bankruptcy is still obtainable to most folks in financial crisis.

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