There are two main types of personal bankruptcy and each has their own set of rules and stipulations. It is important for anyone considering filing for bankruptcy to understand the difference between Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 Bankruptcy. This type of bankruptcy filing is known as straight bankruptcy. What it involves is a liquidation of your assets that are not considered exempt. Exempt property can be tools for work, automobiles and some household furnishings. You can file for Chapter 7 bankruptcy once every six years and some of your property may be sold or given to your creditors. You must also qualify for this type of bankruptcy since only those that cannot afford to pay on their debts are considered. If you can afford to pay some of your debtors then you have to choose the Chapter 13 status instead. Also keep in mind that some debts cannot be discharged. Some examples include back taxes and student loans.
Chapter 13 Bankruptcy. This type of bankruptcy is a little different. You receive a payment plan through the court as long as you have a steady income. You are allowed to keep your property that might otherwise be sold; this can include your home and automobiles. Once you have made the court approved payments, your debt is settled. This one is more of a debt consolidation as opposed to a Chapter 7 bankruptcy, which is a total liquidation of assets that are nonexempt.
If you are considering filing for bankruptcy and live in the Boston North Shore area, please call our law office to discuss your situation and determine which type of bankruptcy is appropriate for you.