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Understanding Chapter 7 and Chapter 13 bankruptcy

On Behalf of | Aug 14, 2019 | Bankruptcy

When people in Connecticut are dealing with piles of unpayable bills or aggressive collection calls, they may be looking for a solution that allows them to obtain some debt relief. Bankruptcy can provide people with a new start that enables them to escape a mountain of debt. There are some credit consequences, but many people who turn to bankruptcy have already suffered serious hits to their credit. However, there are different types of personal bankruptcy. Each may be appropriate for people in different situations.

Chapter 7 bankruptcy is perhaps the best-known type of personal bankruptcy. Known as a liquidation bankruptcy, a filer’s unsecured debts are eliminated and assets sold off to pay a portion of the creditors. The process lasts around three to six months before the bankruptcy is completed. However, only people who make an amount of money equal to or less than the median income in their state are eligible for Chapter 7 bankruptcy. People with high-paying jobs and large debts may find that this option is not available to them. Others may want to retain certain types of property, such as a family home, that would be sold off. Chapter 13 bankruptcy may be an option for both.

Called a reorganization bankruptcy, Chapter 13 lasts for around three to five years and involves a repayment plan approved by the court. A portion of the debts is typically discharged, but people must keep up with their current bills and the repayment plan throughout the entire period of the bankruptcy. This can help people to reorganize their finances.

When people are looking for a new financial future, bankruptcy could be an important option to consider. An attorney may provide advice and guidance on the type of bankruptcy that might be the best choice for each individual and how to move forward with filing.