The Purpose of Bankruptcy
Bankruptcy is a legal process that can help improve your financial situation but some may not exactly understand what bankruptcy is. Many assume it will wipe away debts but certain qualifications should be met depending on your situation. The following basic questions are most commonly asked that may shed light on the bankruptcy process:
What is it and Does it Completely Eliminate Debt?
Bankruptcy allows consumers and businesses to repay or wipe out debt through a legal process in federal court. Chapter 7 bankruptcy is commonly referred to as the “liquidation” process but this chapter also discharges or eliminates qualifying debt. Chapter 13 bankruptcy is a reorganization plan that helps debtors repay debt. The bankruptcy process has a court ordered action called the automatic stay that prevents creditors from continuing collection actions against the debtor. Certain debt may not be eligible for discharge but the bankruptcy process may make paying on ineligible debt manageable.
Which Chapter Helps me Keep Personal Property?
Both chapters have certain ways in helping debtors retain their property depending on their unique situation. Chapter 7 may liquidate qualifying assets to satisfy creditors if discharging the debt is not an option. Chapter 13 helps you retain property as long as payments are made on the court approved plan. Both chapters have exemptions that help you keep a majority of property and assets.
Can I Choose Which Chapter to File?
This often depends on your situation. If you want to choose a certain chapter you need to meet qualifications in order to do so. Reviewing your situation with an experienced attorney may help you determine which chapter is best for you.