Debt allows people to make large purchases now with the expectation that they’ll pay for it later. For a lot of people, this is a promising idea. However, debt obligations can quickly get out of control. People may, for example, take on too much credit card debt or suffer from an injury and owe medical debt. Debt can become even more burdensome when people miss payments and face late fees and higher interest.
When people suffer from too much debt, their lives can fall apart. Debtors may seek ways to resolve their debts quickly and easily. One way this can be done is by filing for bankruptcy. Bankruptcy is a process that helps people discharge large amounts of debt.
Two of the most popular kinds of bankruptcy are Chapter 7 and Chapter 13. Here’s what you should know about each form:
Resolving large amounts of debts with Chapter 7 bankruptcy
Many people suffer from debt because they can’t make payments. When this happens, people may file for Chapter 7 bankruptcy. Chapter 7 bankruptcy can help resolve lots of different kinds of debts, such as medical and credit card debts and personal loans.
Chapter 7 bankruptcy is also often called liquidation bankruptcy. This is because debtors may be required to liquidate nonexempt assets to resolve their debt obligations. However, many people have filed for Chapter 7 bankruptcy without ever liquidating any of their assets.
Reorganizing debts for easier payments with Chapter 13 bankruptcy
Some people can make debt payments but may struggle to do so with their current debt obligations. People with some disposable income may file for Chapter 13 bankruptcy. This kind of bankruptcy helps reorganize debts so that the debtor has an easier time making payments.
Bankruptcy isn’t for everyone, but it has helped many people. If you’re not sure if Chapter 7 or Chapter 13 bankruptcy is the right choice, you may need to get legal help to understand your options.