Many people hear about how other people and companies file for bankruptcy but don’t know what bankruptcy is themselves. In general, bankruptcy is a way for people to deal with tons of unpaid debt that might be impeding their life.
There are a few different kinds of bankruptcy and several benefits for filing bankruptcy. The following are some of the most frequent questions people have about bankruptcy:
What’s Chapter 7 bankruptcy?
Chapter 7 bankruptcy may be one of the most commonly used forms of debt relief. In essence, most or all of a person’s debt will be wiped away after filing for Chapter 7 bankruptcy. Chapter 7 bankruptcy is also known as liquidation bankruptcy because filers may have to liquidate some of their assets.
Will you lose everything in a liquidation bankruptcy?
Liquidation bankruptcy considers people’s assets as either exempt or non-exempt. Exempt assets typically include a vehicle (of a certain value), clothing and some furniture. Alternatively, a second car, second home or art collection may be considered non-exempt and used to relieve debt through liquidation.
What’s a Chapter 13 bankruptcy?
Some people don’t want to liquidate their assets and alternate for a Chapter 13 bankruptcy. Chapter 13 bankruptcy is a refinance program that makes it easier for people to pay off their debt.
Do you pay back all your debt with a Chapter 13 bankruptcy?
Every bankruptcy case is different, but some people frequently only pay a bit of their debt after filing for Chapter 13 bankruptcy. A portion or all of a person’s disposable income is likely used to pay off said debt.
Will your credit be ruined forever?
Bankruptcy is great for people to restart their debt, however, after filing for bankruptcy, people’s credit scores will take a hit. A credit score hit isn’t permanent and can be rebuilt.
Will bankruptcy stop creditors from reaching out to you?
When debt becomes too much for people, creditors will usually reach out for payments. Another benefit of bankruptcy is that, after filing, creditors will likely stop trying to collect on your debt.
This can be a lot to take in all at once. You may need to reach out for legal help when asking more questions or when filing for a bankruptcy claim.