Considering bankruptcy is a big, and ultimately positive, step on the way to financial recovery. If you are just beginning the process of bankruptcy, it is natural to have many questions about the subject.
By far the most “popular” options for personal bankruptcy are Chapter 7 and Chapter 13. According to Experian, Chapter 7 bankruptcy is more popularly known as a “liquidation” bankruptcy while Chapter 13 is a “reorganization” bankruptcy.
Benefits and requirements of Chapter 7
This bankruptcy is generally meant for individuals who have incomes that are too low to be able to pay off their current debt load. The reason why this is considered a “liquidation” bankruptcy is that most of your property will be sold in order to pay off as much of your debt as possible.
Essentially, people who go through with Chapter 7 are likely to lose their homes and cars if they have any assets of this nature. However, the benefits of Chapter 7 include a completely clean slate to start off from as well as spending far less time going through the bankruptcy process and dealing with the aftermath.
Benefits and requirements of Chapter 13
Chapter 13 is considered a “reorganization” bankruptcy because property is not liquidated in order to pay off debt. Chapter 13 is intended for individuals who have a high enough level of income to potentially be able to pay off their debts, assuming that a plan can be worked out. With Chapter 13 you generally get to keep all of your property, but it is possible that you will be going through the process for up to 10 years to get all of your creditors paid.
