Bankruptcy is a process that allows a party struggling with debt and bills they cannot pay to rid themselves of debt and enjoy a fresh financial start. There are many details to understand and any party considering bankruptcy likely has a variety of questions about how the process works and how it can help them.
Bankruptcy is a process that provides protections to consumers. It is administered through the bankruptcy court and the bankruptcy court process. There are two primary types of personal bankruptcy protections available to consumers and they each work a little bit differently and are intended for struggling consumers in different situations. Each type of bankruptcy protection, however, carries the important automatic stay protection that prevents creditor collection actions during the bankruptcy process.
Chapter 7 bankruptcy is a liquidation bankruptcy that allows the filing party to liquidate assets to repay debts. Struggling consumers are only required to liquidate non-exempt assets. A Chapter 13 bankruptcy allows a filing party with a reliable source of income to repay their debts but according to a repayment plan, or reorganization plan, worked out with the bankruptcy court. At the end of either process, there is a debt discharge or remaining debts of debts that were not accounted for in the plan.
Because bankruptcy options are such an important protection for struggling consumers, it is important for them to thoroughly understand their options and how bankruptcy can help them. It is also useful to understand the different types and which is best for the party who is considering bankruptcy protection as an option for help with overwhelming financial struggles.