Debt is a financial obligation that must be paid from a debtor to a creditor. Credit cards, medical bills, late fees and loans are all ways people may accumulate debt. Debt can cause many people to suffer financially. Because debt isn’t easy to recover from, many people look for alternative options.
One option people have to relieve their debt obligations is to file for bankruptcy. If you’re looking to file for bankruptcy, it can help to learn about a few facts. Here’s what you should know:
Fact #1: Chapter 7 bankruptcy is the most popular
Many people file for Chapter 7 bankruptcy. Chapter 7 bankruptcy helps relieve large amounts of debt. Another name for Chapter 7 bankruptcy is liquidation bankruptcy.
Filers may be asked to have nonexempt assets liquidated to relieve financial obligations. Nonexempt assets may include a summer home, sports car or art collection. However, very few people have their assets liquidated.
Fact #2: Chapter 13 bankruptcy is useful for people with disposable income
Alternatively, people can file for Chapter 13 bankruptcy, which is a debt reorganization plan. Debts are reorganized so that it’s easier for the filer to resolve some financial obligations. This option often works best for people who have some disposable income and those who hope to protect certain assets.
Fact #3: You’ll have to wait to file for bankruptcy again
If you’ve filed for bankruptcy once before, then you may need to wait before you do it again. For example, someone filing for Chapter 13 may need to wait six years to file for Chapter 7 bankruptcy. Similarly, it would take eight years to file for Chapter 7 after filing for Chapter 7 bankruptcy.
There’s a lot to understand when filing for bankruptcy. If you are suffering from overwhelming debts, it can help to reach out for legal help to learn about your bankruptcy options.