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2 forms of consumer bankruptcy serve different needs

When credit card debt overwhelms you, finding an option for getting back on track with your finances becomes a priority. One option that you have in these cases is to file for bankruptcy. While many people think that this is an easy way, it actually takes work and sacrifice to make it happen. This can be a very effective financial tool to help you when you just can't get back on top on your own.

One factor that many people don't realize about bankruptcy is that there are two primary forms of consumer filings. These are very different. A Chapter 7 filing is the most common type of bankruptcy. Generally you can protect your assets with exemptions and not lose anything in a Chapter 7.   However, if your assets exceed your exemptions and are at risk you can protect them by filing a Chapter 13.  A Chapter 13 is a payment plan.  This doesn't mean you are paying all of your creditors in full, but you will pay something.  If you complete the payment plan the debts are discharged.

Both forms of bankruptcy come with an automatic stay that prevents creditors from being able to contact you. This can provide some much-needed relief from collection demands that might be coming via email, mailed correspondence and phone calls.

You will have to do your part during the bankruptcy process. One of the responsibilities you have is going through credit counseling and taking a class that can help you learn how to use money and credit responsibly. These lessons can help you live during the bankruptcy and can help you long after. If you think that you need to use this form of financial protection, remember that the sooner you get started, the sooner you will have the relief you need.

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