Different bankruptcy options are available for individuals in different situations so it is helpful to take a look at the different options and compare and contrast which is best for the party considering filing for bankruptcy. All personal bankruptcy protections provide certain types of help to filing parties, including a consumer debt relief and an automatic stay, but is helps to be familiar with the benefits and workings of different types of personal bankruptcy.
There are two primary types of consumer bankruptcy protection including Chapter 7 bankruptcy and Chapter 13 bankruptcy. Taking a look at Chapter 7 bankruptcy first, it is a liquidation bankruptcy process that allows the filing party to liquidate non-exempt assets to repay creditors and enjoy a fresh financial start. Just like Chapter 13 bankruptcy, there are requirements to qualify based on income and debt and filing parties enjoy the automatic stay which prevents creditor collection actions while the bankruptcy process progresses.
Chapter 13 bankruptcy is for filing parties that have a reliable source of income they can use to repay debts according to a repayment plan developed with the help of the bankruptcy court. Chapter 13 bankruptcy is referred to as a reorganization bankruptcy plan because it allows the filing party to reorganize their debts and repay them over a period of time which is usually 3 to 5 years. Like Chapter 7 bankruptcy, filers filing Chapter 13 bankruptcy also enjoy the automatic stay while the reorganization plan is worked out and it is best for those who have income to repay their debts with.
Both types of consumer bankruptcy protection can be a lifeline for struggling consumers facing overwhelming debt day after day. Because of the help they can provide, struggling consumers should understand personal bankruptcy options so they know which is best for their situation to help them get out of debt.