The Two Types of Consumer Bankruptcy
Posted on Oct 14, 2009 12:52pm PDT
When people have decided to file for bankruptcy, they will have to decide which type of consumer bankruptcy they should file for. In the U.S., there are two types of consumer bankruptcy - Chapter 7 and Chapter 13.
Chapter 7, also referred to as liquidation bankruptcy, allows people to have their debts discharged. This means that the debts they owe to their creditors will be eliminated and they will be provided with a clean slate. However, before people can move forward with Chapter 7, they must partake in credit counseling and also complete a means test. In some cases, people who file for Chapter 7 will have their assets and property liquidated. During liquidation, property is sold for a profit. The profit is then applied to the debt that people owe to their various creditors.
The other type of consumer bankruptcy is Chapter 13. Before filing for Chapter 13, people will have to complete credit counseling and take a means test, just like they would for Chapter 7. When people file for Chapter 13, they will have to repay the debt they owe to their creditors over a 3 - 5 year time frame. Instead of making multiple payments to various creditors each month, people who file for Chapter 13 will make a single monthly payment which will be applied to the total debt they owe.
Anytime people are considering filing for bankruptcy, it is important that they understand the difference between Chapter 7 and Chapter 13. The best way to get more information about bankruptcy, they bankruptcy process and bankruptcy laws is by speaking with a qualified bankruptcy lawyer.
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