Debt is easy to accumulate. Some debt may be caused by unexpected medical bills, late loan payments or sudden car repairs. What do you do with all that debt if you’re struggling to pay it off?
Bankruptcy can help people when their debt becomes too much to handle. The two most common choices of bankruptcy are Chapter 7 and Chapter 13. Here’s what you should know:
Chapter 7 bankruptcy is also referred to as “liquidation bankruptcy.” Liquidation bankruptcy helps pay off some or all debt by liquidating assets, but not everything you own. Many assets, like a summer home, car or collectibles could be liquidated, but a vehicle for work, home and clothing will likely be exempt. Most debtors are actually able to protect all of their property.
Debt repayment plan
Alternatively, debtors can file for Chapter 13 bankruptcy and schedule a debt repayment program. Chapter 13 bankruptcy is a reorganization plan and may help debtors repay their debt in three to five years. Unlike Chapter 7 bankruptcy, a repayment plan doesn’t require debtors to liquidate assets. Also, even though you file Chapter 13, you may only have to pay a small percentage of what is owed. As long as you finish the plan the debts are discharged.
Not every debt is relieved
Many forms of medical bills, credit card debt, late fees, business or utility debt are relieved with liquidation bankruptcy or repayment plan. Yet, child support, student loans or tax debt is normally not discharged.
Refiling for bankruptcy
There is no limit to how many times you can file for Chapter 7 and Chapter 13 bankruptcy, however, there is a waiting period before you file again. Here’s how long you’ll have to wait:
- It takes eight years before you can file a Chapter 7 after your first Chapter 7 bankruptcy.
Are you looking to file a Chapter 7 after a Chapter 13 bankruptcy or a Chapter 13 after a Chapter 7? There’s also a waiting period:
- It will take four years to file a Chapter 13 after a Chapter 7 bankruptcy. You could file sooner but would not get a discharge.
- It takes six years to file a Chapter 7 after a Chapter 13.
Filing for bankruptcy can be confusing. Your debt has likely already stressed you out enough, you shouldn’t have to worry about filing for bankruptcy. You need to reach out for legal help considering bankruptcy.