People build up debt for many different reasons. Many people take on small amounts of debt to build up their credit scores. Some people will take on large loans and mortgages to own homes and vehicles. But, many people experience unforeseen kinds of debt, such as medical expenses, vehicle repairs, late fees and interest.
It can be hard for people to pay off these kinds of debts if they aren’t prepared. Issues like unemployment can also make it difficult to pay off large sums of debt. So, what can people do to eliminate their debt? One of the best options for people looking to recover from their debt obligations is filing for bankruptcy.
Bankruptcy is a process that can allow people to resolve their debt obligations. Two of the most common kinds of bankruptcy are Chapter 7 and Chapter 13 bankruptcy. Here’s what you should understand about each process:
Chapter 7 bankruptcy
Chapter 7 bankruptcy is often the most common and preferred form of bankruptcy. This process can resolve large amounts of debts from credit card companies, medical bills and unsecured personal loans. Debtors aren’t responsible for paying off debts resolved through Chapter 7 bankruptcy.
Chapter 7 bankruptcy is also often referred to as liquidation bankruptcy. In rare cases, filers may see some non-exempt assets liquidated to satisfy creditors. Non-exempt assets could include summer homes, sports vehicles and art collections as opposed to exempt assets such as a family home, used vehicle and clothing.
Chapter 13 bankruptcy
Chapter 13 bankruptcy is an alternative process for people who can pay off some of their assets. Filers of Chapter 13 bankruptcy may see their debts reorganized so it’s easier for them to pay them off.
People looking to satisfy their debt obligations may need to consider bankruptcy. Bankruptcy is a complicated legal matter and many considerations will be made during the filing.