When you’re unable to make payments to lenders and creditors, you can explore personal bankruptcy options to help relieve your debts. However, it’s essential to choose the type of bankruptcy suitable for your circumstances. Here’s what you should know about the two common types of personal bankruptcy you can file.

Chapter 7 vs. Chapter 13 Bankruptcy

Personal bankruptcy can fall under Chapter 7 and Chapter 13 of the Bankruptcy Code. The main difference between them has to do with how you’ll repay creditors.

Chapter 7 is more common and involves having a bankruptcy trustee sell your property to pay your debts. In return, the court will issue a judgment that discharges most of your debts.

Under Chapter 7, you’re allowed to keep exempted property, but you won’t be able to discharge some debts, like student loans and child support.

On the other hand, Chapter 13 calls for the submission of a repayment plan detailing how you intend to pay off creditors within three to five years. The bankruptcy trustee will be in charge of looking after your finances and how you’re proceeding with the repayment plan. As soon as you successfully finish the plan, the court will discharge any remaining debt.

Keep in mind that Chapter 13 may be the better option if your income is more than the median income for the same family size in your state. 

How Can Bankruptcy Help You?

Both Chapter 7 and Chapter 13 can stop debt collection activities, repossessions, foreclosures, and utility shut-offs. You won’t have to deal with stressful phone calls and other ways collectors may attempt to secure funds from you.

Bankruptcy will also grant certain exemptions that allow you to keep some of your assets even after repayment of debt.

The most important benefit of filing for bankruptcy is the chance to start fresh financially. With the guidance of a reliable bankruptcy attorney, you’ll learn proper financial habits, so you can slowly rebuild your credit and avoid making the same mistakes again.

Start the bankruptcy process right with Donald L. Spafford, Jr., Attorney at Law in Honolulu, HI. With more than 30 years of experience, the firm provides personalized attention and excellent legal representation when it comes to personal bankruptcy, debt consolidation, and other debt relief solutions. Call (808) 532-6300 or visit the website to schedule a free consultation.