When a person simply cannot meet his or her credit payments anymore they have the option of declaring personal bankruptcy. Bankruptcy is not a decision to be taken lightly and it is crucial to have legal representation through the process. There are two major types of personal bankruptcy, Chapter 7 and Chapter 13.
Chapter 7 bankruptcy allow a person to discharge debts after his or her liquid assets are used to pay down some of it. Liquid assets are anything you own which can quickly be converted into cash. Good examples of liquid assets are bank accounts and stocks. Each state has its own rules about what liquid assets a person must use for Chapter 7 bankruptcy. After all eligible liquid assets are used to pay creditors the remaining debt is discharged.
Instead of discharging all debt right away, Chapter 13 bankruptcy creates a repayment plan for all of part of a person’s debt. Typically these plans are structured to last for three to five years. All repayment plans are approved by a judge.
Although it is rare, individuals can file for Chapter 11 bankruptcy as well. It is very similar to Chapter 13. The main difference is Chapter 11 has no limit on the amount of money a debtor can owe. Chapter 11 was originally intended to only apply to businesses but individuals are now able to utilize Chapter 11 bankruptcy.
If you are considering declaring bankruptcy you can contact an attorney at our firm to go over your options at 732-444-6303 or contact us on our website.