There are two primary types involved with bankruptcy: Chapter 7 and Chapter 13. Each must be filed in a federal bankruptcy court.
Chapter 7 is known as straight bankruptcy, and involves the liquidation of all assets that are not exempt (or, excluded from the bankruptcy process.) This may include automobiles, work-related tools, and basic household strategies.
Chapter 13 allows people with steady income to keep property, like a house or a car that they might otherwise lose in bankruptcy. The court approves a payment plan that allows you to repay of your debt in a three to five year period rather than liquidate your property. After you have made the payments under the plan, the remaining debt is discharged.
Bankruptcy involves certain hurdles that a consumer must clear before even filing for bankruptcy, no matter the chapter. You must get credit counseling (which I've already discussed) from a government approved organization within six months prior to filing. Also, with a Chapter 7bankruptcy, you must satisfy a "means test," which requires you to confirm that your income does not exceed a certain amount.
In conclusion, bankruptcy is a legal procedure that offers a fresh start for people who cannot legally satisfy their debts. Keep in mind that bankruptcy may stay on your credit report for 10 years making it difficult to obtain credit, life insurance, or even a job.
If possible, AVOID BANKRUPTCY AT ALL COSTS! This is the last resort for anyone and does long-lasting damages to your credit and your health! Try utilizing a debt elimination service first, such as debt settlement. Debt settlement services are a good means to a last resort. To learn more about debt settlement, visit our "Debt Settlement" page.
Looking for debt relief? Check out Curadebt.
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