Coming to terms with your financial state might be rather shocking, especially if you find that you have more debt than you realized. For many people, delving into the finances is very difficult because it might seem like the debt is insurmountable.
If you take a look into the finances and realize that you are in over your head, you might be ready to look into your options. Two options that you will likely find on the list are Chapter 7 bankruptcy and Chapter 13 bankruptcy. While both of these offer marked benefits, there are some differences to consider.
What is the automatic stay?
When you file bankruptcy, no matter which type, an automatic stay is issued. This means that creditors have to stop trying to collect the debt. They can't call you or mail anything to you about the debt. They can't send someone by your home or business to contact you. This aspect of a bankruptcy is sometimes one of the benefits that people enjoy the most since it can return the peace to their life.
Can I keep my home and car?
The answer to this depends on what form of bankruptcy you file. In a Chapter 13 bankruptcy, you can usually hang on to the home and a vehicle as long as you will be able to keep up with the payments and get the account caught up by the time you are done with the terms of the bankruptcy filing. In a Chapter 7 bankruptcy, there is a good chance that you will have to part with these assets. In both bankruptcies, there are some assets that are exempt from the case. Make sure that you find out what, if any, of your assets are exempt so you know what you might be able to keep and what will have to go.
Do I have to make any payments?
A Chapter 7 bankruptcy is a liquidation bankruptcy that doesn't require you to make payments. You do have to meet the criteria of a means test. Your assets will be liquidated to pay off as much of the debt as possible. Any debt remaining is forgiven when the bankruptcy is discharged. In a Chapter 13 bankruptcy, you will make regular payments to the trustee on a set schedule. This is often deemed the working man's bankruptcy since you do make payments. In this form of bankruptcy, any debts that remain once you make all of the required payments will be forgiven.