Deciphering Chapter 7 bankruptcy from Chapter 13 bankruptcy

Deciphering Chapter 7 bankruptcy from Chapter 13 bankruptcy

Financial disaster can strike even the most responsible person in Arizona at any moment. For example, a serious illness or accident can lead to insurmountable medical bills. Or perhaps a person unexpectedly loses their job, making them unable to pay their mortgage, credit card bills or car payments. When this happens, filing for bankruptcy can be a good choice for rebounding financially. It is important then, to understand what personal bankruptcy options are available to debtors.

One type of bankruptcy you can file for is Chapter 13 bankruptcy. Under Chapter 13 bankruptcy, the debtor will be able to create a court-approved plan allowing them to disburse a percentage of their income within a certain amount of time to the court, in order to pay back their creditors. The Bankruptcy Court will protect the debtor during this time. This type of bankruptcy may be most useful for debtors who do have a regular income and believe that, with help, they may be able to repay their debts.

Another type of bankruptcy you can file for is Chapter 7 bankruptcy. Chapter 7 bankruptcy, also known as liquidation bankruptcy, is when an individual sells their non-exempt property in exchange for cash, which is then handed out to the debtor's creditors. Some types of property are exempt from the bankruptcy process, and will not be subject to sale. Chapter 7 bankruptcy may be most useful for those who believe they will never be able to recover financially without filing for bankruptcy.

As this shows, debtors have options when it comes to filing for personal bankruptcy. By doing their research and consulting with professionals, debtors can make the choices that are in their best interests and that will get them back on their feet financially.

Source: azb.uscourts.gov, "Frequently Asked Questions (FAQs), What is the difference between chapters," Accessed Oct. 13, 2014

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