There are different types of personal bankruptcy options available for individuals in different situations. It is helpful to understand Chapter 7 versus Chapter 13 bankruptcy options so the struggling consumer can select the best option for their situation and needs.
At the outset, the party considering bankruptcy protection should understand that both types of personal bankruptcy can provide debt relief, a debt discharge and an automatic stay immediately after filing for bankruptcy. The automatic stay prevents creditor collection actions during the bankruptcy process. The option to file for one personal bankruptcy option or the other largely rests on the income level of the filing party. If the filing party has a reliable source of income to repay their debts, or at least some of them, they may be considered a strong candidate for Chapter 13 reorganization bankruptcy.
Alternately, when the filing party is without a reliable source of income, and their income is at or below the level needed to qualify, Chapter 7 bankruptcy is another personal bankruptcy protection option that allows the filing party to liquidate non-exempt assets to repay creditors and enjoy debt relief. Because they may be treated differently according to the different bankruptcy options, it is important for filing parties to take a look at the list of protections for property they may be wondering about and how each bankruptcy option treats those concerns. In some circumstances, a bankruptcy may also be converted into one or the other of the personal bankruptcy options so filing parties should be on the look out for that.
Chapter 7 bankruptcy is oftentimes considered a simpler and quicker option and accounts for just over 70 percent or all bankruptcy filings. Struggling consumers considering filing for bankruptcy should acquaint themselves with the options available to them and decide which is best for them.