|
 |
Bankruptcy:
A last resort... Page 2
continued
Types of Bankruptcy
There are two different types of personal bankruptcy you can file:
Chapter 7
Chapter 7, known as "straight bankruptcy", allows you to discharge most of your
consumer debts- credit cards, back rent, utility bills, medical bills and the like. Much
of the property you own will be liquidated to help pay off creditors and relieve you from
any further debt. It is possible for this type of bankruptcy to be initiated voluntarily
by the individual or, in some cases, involuntarily by the creditor. In either case,
Chapter 7 provides some temporary relief from garnishment of wages or repossession of
property. Chapter 7 bankruptcy can be filed only once during a 6-year period.
There are a few debts that
are not erased with Chapter 7 bankruptcy:
- Alimony payments.
- Child support.
- Student loans due less than 7 years ago.
- Court-ordered damages.
- Income taxes due less than 3 years ago.
- Money owed from a divorce decree or marriage settlement.
For more information on
Chapter 7 bankruptcy, see Nolo Press' How to File for Chapter 7 Bankruptcy by Elias, Renauer, and Leonard.
Chapter 13
Chapter 13, known as "wage earner's plan", allows you to keep your property but
give up control of your finances to a bankruptcy court. Under the court's authority and
using your wages, a 3-5 year repayment plan is developed to pay back creditors. The
plan is monitored by a court-appointed person called a trustee. After the repayment plan
is complete, you end up debt-free from the bankruptcy.
If you have reliable and steady income to make payments, Chapter 13 might be a viable
option. Many individuals file for Chapter 13 to get back on track from a life of missed
mortgage or car payments. Others use it to help pay off a tax burden or student loans.
Credit and Debt Calculators:
------------------------------
• Should I pay off debt or
invest in savings?
• What will it take to pay off my balance?
• Should I consolidate my
debts?
• How Much Am I Spending? |
