Over 474 thousand people filed for Chapter 7 bankruptcy in 2019, making it the most popular branch of bankruptcy. It’s not the only branch you can use, though.
What are the different types of bankruptcy, you might wonder? There are two main types that people use, but there are several other branches available for some cases.
Here are the two most popular branches of bankruptcy you can use if you desperately need a way to get out of debt.
Chapter 7 Bankruptcy
Many people find that Chapter 7 bankruptcy is the solution they needed for their debt problems. Attorneys often call this branch the “liquidation” branch of bankruptcy, as it sometimes requires surrendering assets.
When you’re looking at the various kinds of bankruptcy options, this option works well for people who meet the following qualities:
- Earning less money than average people in the state
- Owing money primarily on credit card bills and medical bills
- Having few assets that are worth a lot of money
You can only use this branch of bankruptcy if you meet the eligibility requirements, which mainly consist of passing the means test. The means test is an income test that compares your earnings to average earnings.
When you file for Chapter 7, the court provides a discharge of all your qualifying debts, leaving them with zero balances. In return, the court might ask for some of your assets, including money you have in the bank.
One of the benefits of this branch is the speed. You can complete a Chapter 7 case in around six months. One of the downsides is that the bankruptcy filing will appear on your credit report for ten years.
Chapter 7 is one of many bankruptcy options you can choose from when you need debt relief. You can learn more about the process by speaking with a local bankruptcy attorney.
Chapter 13 Bankruptcy
Chapter 13 is one of the other common types of bankruptcy that people choose. When declaring bankruptcy under this branch, you must agree to repay your debts.
Your attorney creates the repayment plan for you, and you must follow it for the next three to five years. You’ll pay the money to a bankruptcy trustee from the court, and the trustee pays your creditors with the money.
It takes up to five years to complete a Chapter 13 case, and the filing stays on your record for seven years from the date you file your case.
One of the benefits of this branch is that you can keep your assets. Of all the bankruptcy types you can choose, this is the only one that stops a foreclosure from occurring.
If you’re interested in learning more about this branch, you can talk to a bankruptcy attorney.
Learn About the Different Types of Bankruptcy to Choose the Right One
Know that you know more about the different types of bankruptcy, do you think you might want to pursue one of these options? If so, you can by contacting a law firm.
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