Declaring bankruptcy is a complex process. One decision creates ripples that shake not just the financial aspect of your life; these ripples will also affect your future a great deal. The state of Illinois acknowledges the complexity of the bankruptcy filing that it requires the debtors to undergo credit counseling and complete a financial management instructional course.
Here are the basics of the Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Chapter 7: Straight Bankruptcy
Chapter 7 bankruptcy wipes out your entire debt, giving it the name “straight bankruptcy.” Lawyers from Chang Legal LLC explain that in this type, there’s no need for the filer to have a repayment plan. The filer can’t hold their assets anymore, however. The court trustee collects the nonexempt assets and sells them to pay the creditors. The good thing about filing a Chapter 7 bankruptcy is that you can have a fresh start. The money you earn after the date of the filing is yours.
Chapter 13: Reorganization Bankruptcy
Chapter 13 is designed to repay as much debt as possible. In this type, the filer can keep all the assets. There should be a repayment plan, though. In this arrangement, you will be given several years to repay your debts. This bankruptcy is also called the “reorganization bankruptcy” because of the detailed repayment plan involved.
In 2015, there are approximately 820,000 personal bankruptcy cases filed, 37% were Chapter 13 and 63 percent were Chapter 7.
Chapter 13 bankruptcy works if you have a steady income and you are confident that your financial problems are temporary. If it is otherwise, Chapter 7 is probably the best option for you. To make the best move, get the help of bankruptcy lawyers. They can help you evaluate your finances and choose the option that is more beneficial.