What are the different types of personal bankruptcy protection?
Personal bankruptcy protection is an important legal tool for struggling consumers to consider. Different types of personal bankruptcy protections provide protections for filing parties in different situations. Filing parties should understand these different options so they can decide which one is best for them.
Types of personal bankruptcy protection
Chapter 7 bankruptcy protection is often referred to as a liquidation bankruptcy option. It allows the filing party to liquidate non-exempt assets to repay creditors and enjoy debt relief. Exempt assets may not be subject to the bankruptcy liquidation process. Chapter 7 bankruptcy exemptions protect property in certain categories and may be able to protect property that does not fall into a specified category as well, depending on the rules where the filing party is filing for personal bankruptcy protection.
Meanwhile, Chapter 13 bankruptcy is referred to as a reorganization bankruptcy option that allows the filing party to reorganize their debts to repay them over a more manageable period of time and through a more manageable repayment plan. Filing parties are typically given 3 to 5 years to repay their repayment plan.
The repayment plan is worked out with the help of the bankruptcy court. Once the filing party has complied with the repayment plan, they can receive a debt discharge and enjoy a fresh financial start.
Chapter 13 bankruptcy is best for those that have a reliable source of income to repay their debts. For that reason, there are different personal bankruptcy options and different requirements to qualify for each that struggling consumers considering bankruptcy as an option to relieve the stress of overwhelming debt can consider.