Types of Bankruptcy

Bankruptcy is a procedure that is designed to relieve debt

to consumers who have fallen on hard financial times and

cannot afford to pay their existing debts.



While there are many types of bankruptcy out there, the

most commonplace are chapter 7 bankruptcies and chapter 13

bankruptcies of the bankruptcy code.



Chapter 7 is the most common for the individual. It is the

complete erasing of qualifying debt. The debtor is then

released from all repayment obligations. But chapter 7

bankruptcies are not to be taken lightly.



While giving you an immediate fresh start in repairing your

finances, it remains on your credit report for 10 years.

You will be looked at as a high credit risk and financially

irresponsible.



Chapter 13 is less harmful to your credit. Though there are

still marks against you, since you will be working to repay

your debts on a payment plan, you do not look like you are

financially irresponsible, though you are still considered

a slight credit risk. Also, your qualifying assets will not

be sold with the chapter 13 bankruptcy like they would in

the chapter 7.



In 2005 an act passed legislation that now makes it more

difficult for individuals to receive a chapter 7

bankruptcies. There are now terms to be followed such as

pre-filing credit counseling and post-filing financial

education.



So when considering your file for bankruptcy, it is

important to weigh the sides between chapter 7 and chapter

13. Which one will do you more harm than good when it comes

to solving your financial problems?