If you are facing an insurmountable amount of debt, filing for bankruptcy may be able to help you overcome your current financial problems and begin enjoying the fresh start that you need and deserve. However, in order to enjoy the benefits that come along with filing a bankruptcy petition, you will need to first ensure you are filing the right type of bankruptcy petition for your particular needs.
For most people, this will mean choosing between Chapter 7 and Chapter 13 bankruptcy. When making this important decision, you will need to consider the impact that each option will have on both your debts and your assets:
How Bankruptcy Impacts Your Debts
Both Chapter 7 and Chapter 13 bankruptcy will have a positive impact on your debts. However, the way in which these bankruptcy options impact your debt will be quite different.
When filing for Chapter 7 bankruptcy, you will have the opportunity to discharge your unsecured debts. This category of debts includes debts that are not secured by the use of real property or collateral, such as credit card and medical bills.
Once your bankruptcy case reaches conclusion, you will no longer be responsible for paying these debts. However, any secured debts, such as your mortgage or car loan, will still need to be repaid in full.
Chapter 13 bankruptcy on the other hand, does not allow for the discharge of any debts. Instead, this type of bankruptcy allows you the ability to restructure all of your debts so that you are better able to settle your debts. This restructuring process may involve the reduction of your monthly payment or interest rates, and may also require your creditors to waive certain fees, such as late fees.
How Bankruptcy Impacts Your Assets
Chapter 13 bankruptcy will have virtually no impact on your assets. Since this type of bankruptcy requires you to repay all of your debts, there is simply no reason to seize any of your assets. Consequently, this will often be the best option for people who have a considerable number of assets which they wish to protect from the bankruptcy process.
The impact that Chapter 7 bankruptcy will have on your assets will depend greatly upon the value of your assets. This is because while a minimal number of assets will be protected by state and federal bankruptcy exemption laws, any additional assets that you posses can be seized and sold to cover as much of your debt as possible before discharging the remaining balance.
The Bottom Line
Your financial situation is unique. Therefore, you will not be able to rely on the experiences of family members and friends to guide you through the process of filing for bankruptcy. Just because someone you know benefited from the use of a Chapter 7 bankruptcy petition, does not mean that you will benefit equally from this type of bankruptcy.
Consequently, if you require additional guidance regarding your bankruptcy case, it is always better to turn to a qualified chapter 13 bankruptcy lawyer than to turn to your loved ones for advice.