What are Your Options for Filing Bankruptcy?

In the United States, you can relieve all or part of your debt when you no longer have the ability to meet your obligations to your creditors. There are different types of bankruptcy which consumers are allowed to file. The two most common types of bankruptcy filed are chapter 7 and chapter 13. Chapter 7 allows a debtor to discharge all or part of his or her debt. Chapter 13 allows the debtor to repay all or part of his or her debt in installments.

Under chapter 7 bankruptcy, you can be relieved of all or part of your debts after your liquid assets are re-used to pay on your outstanding balances. Liquid assets are assets that can be quickly converted into cash such as checking and savings accounts. Checking and savings accounts are typically non-exempt assets. Exempt assets cannot be used to repay creditors. Each state has laws that determine which liquid assets are exempt. After the non-exempt liquid assets have been distributed to the creditors, the remaining debt is discharged, and you are no longer liable. Creditors can no longer attempt to collect on these accounts.

Under chapter 13 bankruptcy, you are required to repay all or part of your outstanding bills via a repay payment plan. Most repayment plans are from three to five years. When you file for bankruptcy, you will submit your repayment plan to the court. Then you should begin making payments to the court, which in turn pays your creditors. You must begin repaying the debt even if your plan has not been approved by the court. Expect a hearing within a few weeks. Creditors can dispute the payment amounts, but the judge makes the final decision. After the repayment plan has been approved by the court, you must continue to make the payments. When you’ve finished making all of your payments, any remaining debt is discharged and you are no longer liable for those debts. Chapter 13 is a good option if you have a secured debt such as a car loan that you wish to continue paying. You also may want to consider chapter 13 if you want to keep certain liquid assets.