Bankruptcy is a legal proceeding where a debtor seeks relief from creditors through liquidation of assets or reorganization of debts. There are two main types of bankruptcy: Chapter 7 (liquidation) and Chapter 13 (reorganization).
The type of bankruptcy you file depends on whether you want to pay off your debt or sell your property. If you don’t have enough income to cover your expenses, filing for Chapter 7 bankruptcy might be the best option. On the other hand, if you have some assets that you can sell to repay your creditors, Chapter 13 bankruptcy might be better suited for you.
Chapter 7 Bankruptcy – Liquidation
A Chapter 7 bankruptcy involves liquidating all of your assets in order to pay off your creditors. This means selling any items that you own, such as cars, furniture, jewelry, etc. You may also need to sell off any real estate you own. The money you receive will go directly towards paying off your debts.
Chapter 13 Bankruptcy – Reorganization
A Chapter 13 bankruptcy allows you to keep most of your assets while repaying your creditors over time. In this case, you must use up all of your disposable income every month to make payments to your creditors. Once you complete your repayment plan, your remaining debts will be discharged.
How do I know which type of bankruptcy is right for me?
If you have too much debt to handle, then it’s likely that you should consider filing for Chapter 7 bankruptcy. However, if you have enough assets to pay off your debts, but not enough to maintain your current lifestyle, then you should consider filing for a Chapter 13 bankruptcy instead.
If you have questions about how a particular type of bankruptcy works, you can always contact an attorney who specializes in bankruptcy law.
How long does a typical Chapter 7 Bankruptcy take?
In general, it takes between 3-6 months to complete a Chapter 7 bankruptcy. It varies depending on how many assets you own and how much debt you owe.
How long does a typical Chapter 13 bankruptcy take?
It usually takes anywhere from 2-5 years to complete a Chapter 13 bankruptcy. This is because you must use up all your disposable income each month to repay your creditors.
When should I file for bankruptcy?
You should never delay filing for bankruptcy. A creditor could sue you and garnish your wages before you even get the chance to file.
You should also avoid filing for bankruptcy during a period of financial hardship. Most people find themselves in this situation when they lose their job or experience a major illness.
Can I still work during my bankruptcy?
Yes, you can continue working throughout your bankruptcy process. Your employer cannot fire you or discriminate against you based on your bankruptcy status.
However, you should be aware that your credit score will suffer slightly after filing for bankruptcy. This is due to the fact that lenders will view you as having a negative payment history.