Understanding Bankruptcy and Its Effects

Taking out a loan or financing is a widely accepted norm. In fact, credit card debt, auto, student loan and mortgage debt rose significantly in 2014 compared to the previous years. This fact also shows the potential number of people who might have problems paying back their debts. For many who have exhausted ways to do so, they can resort to filing for bankruptcy.

Bankruptcy is the process of eliminating or repaying a portion or a whole debt under the protection of the federal bankruptcy court. It can be accomplished either by liquidating a debtor’s property or by reorganizing the repayment agreement. These options are elaborated in Chapter 7 and Chapter 13 Bankruptcy. The court shall decide which should resolve a debtor’s financial obligation.

Chapters 7 and 13: Know the Difference

When your debts have become unmanageably high and you have decided to file for bankruptcy, one of the first things you’ll have to determine is whether to apply for a Chapter 7 or a Chapter 13 bankruptcy. The choice between the two is key to how your debts are to be settled, and the degree of property protection that you get.