A person who is facing financial difficulties because of the downturn of the economy might realize that they just can’t get ahead on their bills. Struggling to pay every bill can make life miserable. Fortunately, the laws of this country do provide an outlet for people who need to find financial freedom from the crushing debts.
Individuals who have more debt than they can afford can seek protection under Chapter 7 or Chapter 13 bankruptcy. While these have the same outcome, there are some very important differences between them. Understanding these might help you decide which is best for your circumstances.
A Chapter 7 bankruptcy is known as a liquidation bankruptcy because your nonexempt assets are liquidated and used to pay off your creditors. Any balance remaining on the accounts after this happens are discharged. This type of case is over in a matter of months, so it is the must faster option for individuals.
A Chapter 13 bankruptcy is known as a wage earners bankruptcy because you make regular payments to the bankruptcy trustee to pay off the debts. The payments continue for three to five years depending on the specifics of the case. Any balance that is still due on the accounts after the final payment is discharged.
In both types of bankruptcy, you can count on the protection of the automatic stay. This prohibits creditors from being able to contact you in an attempt to collect debts. It exists so that no creditor is favored over another one during the process.
You have to ensure that you meet the requirements for the chapter you want to file for protection under so that there aren’t any delays with your case. From there, you can enjoy the protections and fresh start these plans provide.