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The reason you're facing bankruptcy determines what type you use

You know that it's time to declare bankruptcy. The debt you're facing is just too much. Now you just have to figure out which type you want to use.

There are a lot of factors to consider, and this is not something to take lightly. You may only be eligible for one type. A good place to start, though, is simply by considering why you're facing bankruptcy in the first place.

For example, maybe you haven't been able to land a job in years. That's not likely going to change. A medical emergency that happened without insurance put you into serious debt.

Chapter 7 bankruptcy may be best in a case like that. You don't have a lot of assets. Chapter 7 liquidates assets to forgive the debt, so you don't stand to lose that much.

Or, for instance, maybe you were working at a high-paying job. You carried a lot of debt, confident that you could make the payments. Then you lost your job. You fell behind on everything. Since then, you've landed a brand new job. It doesn't pay what you used to make and you can't make all those back payments at once, but you have an income.

Chapter 13 may be right in that situation. It reorganizes your debt and provides you with a payment plan that you can afford on your current income. You get to keep your assets and pay off your debt over time, which is nice when there's still money coming in.

It pays to know all of your legal options when you're facing high debt levels and considering bankruptcy. Be sure you know what rights you have and what path is best for you.

Source: Credit Cards, "14 key factors when considering bankruptcy," Dana Dratch, accessed Oct. 13, 2017

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