When your debts begin to spiral out of control, you may find yourself looking for ways to get your head back above water. In some cases, you may find that filing for bankruptcy may help you get the fresh start you need, but you may not know much about the process or how it all works.
Most people filing for personal bankruptcy follow either a Chapter 7 or a Chapter 13 format. There are some key differences between the two types. There are also certain eligibility requirements you must meet to move forward with a Chapter 7 filing. What are some of the major differences that exist between Chapter 7 and Chapter 13 bankruptcies?
Chapter 7 filings
If you have almost no money available to put toward your debts, you may be able to pass the bankruptcy means test, which is necessary before moving forward with a Chapter 7 bankruptcy. With this type of filing, you may have to sell off certain assets, such as your home, to pay back some of what you owe. Losing your home is not definite in a Chapter 7 filing, though. Every bankruptcy case is different.
Chapter 13 filings
If you do not qualify for a Chapter 7 bankruptcy, or if you prefer to restructure your debts in a manner that may allow you to keep your home and other valuable assets, you may want to think about filing for Chapter 13. A Chapter 13 filing is a reorganization bankruptcy. This means that, rather than liquidating your assets, you restructure your debts in a way that makes them more manageable.