Bankruptcy might seem like a rare occurrence, but in just one year in the United States, there were approximately 1,071,932 bankruptcy cases filed. While some of those were businesses and larger companies, many were filed by citizens with an outstanding amount of debt. However, it’s not as easy as filling out a few forms. If you’re considering filing for bankruptcy, there are a few things you should know about the options available to you.
Chapter 7 Bankruptcy
If you have an outstanding amount of debt and not have the financial ability to pay it, then Chapter 7 bankruptcy may be the best option for you. The fee for filing this kind of bankruptcy is currently $306, and the process typically takes about six months to complete. This type of bankruptcy eliminates any unsecured debts you might have, such as credit card bills, personal loans, and medical bills. In addition, you will be protected from any kind of lawsuits against you. Chapter 7 bankruptcy does not, however, eliminate what are known as secured debts, such as car loans or mortgages.
Chapter 11 Bankruptcy
This type of bankruptcy case does not typically apply to individuals. Of the over 8,000 Chapter 11 cases filed in the year 2013, nearly all of them were by businesses. Often called business reorganization, Chapter 11 bankruptcy exists to relieve some existing, unsecured debts, and restructure the way other debts are paid. This type of bankruptcy is a long and involved process and requires an experienced bankruptcy lawyer to be completed correctly.
Chapter 13 Bankruptcy
Unlike other forms of bankruptcy cases, Chapter 13 does not eliminate any unsecured debts. Rather, it is designed to help you if you’re falling behind on debts such as student loans, mortgage payments, and other secured types of debt. This type of bankruptcy must be completed under court supervision, and typically sets forth a timeline of no longer than five years for you to get back on schedule with your payments.
No matter the financial struggle, if you’re considering filing for bankruptcy, make sure you’re choosing the plan that best fits your situation. Even more importantly, make sure you consult an experienced professional before doing anything else. Bankruptcy affects your credit, and could impact your future financial position when applying for loans. As with any legal or financial matter, don’t jump right in, and make sure you’re properly informed.