Bankruptcy Considerations

Bankruptcy is a legal vehicle that allows a consumer or company to clear debts by way of liquidation or repayment. There are many different options–or “Chapters”–to file bankruptcy. For the average consumer, the options are limited to a Chapter 7 filing or a Chapter 13 filing. A successful Chapter 7 filing clears all debt, and is synonymous with liquidation. Chapter 13 allows a debtor to keep their assets and repay their debts.

It is important to know upfront that bankruptcy cannot clear debts from unpaid taxes, unpaid support orders, student loan debt, and a few other types of debt. Speaking with an attorney is essential in a bankruptcy filing because bankruptcy has long-term financial and legal consequences. A mistake in a bankruptcy case can leave devastating financial and legal results.

Automatic stay protection may be one of the biggest benefits you receive when filing for bankruptcy. This protection stops all creditor actions against you the second you file your case with the court — a powerful way to protect your home against foreclosure, regardless of how close the sheriff’s sale date is.

What does filing a Chapter 7 mean?

Chapter 7 bankruptcy is commonly known as liquidation, or straight bankruptcy. This type of filing allows you to walk away from unmanageable debts and avoid paying those debts back to creditors. You can also let go of the fear that creditors will later come after you on these debts.

What does filing a Chapter 13 mean?

A Chapter 13 filing implements a repayment plan which allows a consumer to keep their property by repaying debts through the bankruptcy court — in contrast to liquidating assets to eliminate debt, as is the case in Chapter 7.