Personal bankruptcy options are available for those struggling with the stress of overwhelming debt. The bankruptcy process can help reduce or eliminate debt or provide a timeline to repay debts that cannot be discharged over time and under more favorable terms.
Chapter 7 bankruptcy is one type of personal bankruptcy that can allow for the cancellation of unsecured debts, such as credit card debt and personal loans. To file for Chapter 7 bankruptcy, individuals must meet certain income requirements. Chapter 7 bankruptcy is often referred to as liquidation bankruptcy, which means that assets are liquidated to repay creditors. It is important to note, however, that as part of the Chapter 7 bankruptcy process, certain assets are exempt from the liquidation process.
Chapter 13 bankruptcy is another type of personal bankruptcy that provides for the discharge of some debts along with the repayment of others over a 3 to 5 year period as part of a repayment plan. For debts that cannot be discharged, the filing party may be able to develop a repayment plan. Similar to Chapter 7 bankruptcy, individuals must meet certain income and debt requirements to file for Chapter 13 bankruptcy; individuals may qualify for Chapter 13 if they do not meet the requirements of Chapter 7. Chapter 13 bankruptcy is a reorganization bankruptcy process commonly considered for filing parties that have a reliable source of income.
There are different personal bankruptcy options for filing parties to consider based on the needs of their situation. The more potential filing parties understand about the personal bankruptcy options available to them, the better position they will be in to choose the debt relief option that is best for them.
Source: Cornell University Law School, “Bankruptcy,” Accessed March 21, 2017