If you’re struggling with debt, you don’t have to give up hope. You may think that declaring bankruptcy is the end of the world, but it’s a tool you can use to get your debt under control so you can get a fresh start. While bankruptcy can’t clear every kind of debt, it can put a stop to certain collection actions and can eliminate unsecured credit card debt, medical bills, utility payments, and more. The U.S. bankruptcy code outlines several different ways you can declare bankruptcy and depending on which one you choose, you may even be able to retain certain assets. Here are the different types of bankruptcies and the benefits they can grant you:
Chapter 7 Bankruptcy
Often called liquidation, Chapter 7 bankruptcy is the most common type used by individuals. Under Chapter 7, any valuable assets you own will be liquidated to cover your debts. After that, debt that has not been secured by collateral can be erased, except student loans, tax debt, and some other forms of debt.
Your ability to declare Chapter 7 bankruptcy is determined by a means test, where the court will find out if you make enough money to pay back your debt. If you don’t make enough money, you will be able to discharge your debts under Chapter 7. If you make too much money, you will need to use another portion of the bankruptcy code known as Chapter 13.
Chapter 13 Bankruptcy
If the courts decide you make enough money to pay back your debts, you can use Chapter 13 to restructure them and reduce your monthly payments. Instead of eliminating your debt, you will go on a payment plan to spread it out over the next 3-5 years. The benefit of Chapter 13 is that it can allow you to retain certain assets that would be lost under Chapter 7.
One drawback of Chapter 13 is that it places limits on how much debt can be restructured. If your debts are higher than that amount, you will have to use another portion of the bankruptcy code.
Other Types of Bankruptcy
While the two bankruptcies listed above are usually the ones used by individuals, there are 4 other types. Depending on your assets, debts, and income, they may apply to your situation. Chapter 11 bankruptcy is used by businesses and corporations to restructure their debt and prevent them from closing. It may also apply to individuals with a lot of high-value assets like real estate. Chapter 12 works a lot like Chapter 13 but can only be used by family farmers and fisherman and it has higher debt limits. Chapter 9 is used by municipalities to restructure their debt, and Chapter 15 is designed to give foreign debtors a way to utilize U.S. bankruptcy courts. As an average American, it’s unlikely you would ever need to use either of those two.
Finding a Solution for Your Debt
If you are considering bankruptcy, the best thing to do is talk to a top bankruptcy lawyer in Bucks County, PA like the ones at Nahrgang & Associates. Your lawyer will examine your case, your assets, and your debts, then educate you about each type of bankruptcy and then help you determine which one will work best for your situation. You don’t have to let your debt control the rest of your life. Speaking to a bankruptcy lawyer today can get you on the path to eliminating your debt so you can start over. Residents of Southeastern Pennsylvania can get in touch with Nahrgang & Associates by calling (610) 489-3041 or by filling out the online form on our contact page.