People in major debt can hardly find beneficial and effective solutions and unfortunately they end up filing for bankruptcy. Just as debt problems the solutions are also differing. For different debts there are different bankruptcy chapters, the two commonly filed for being Chapter 7 and Chapter 13 Bankruptcy. Before filing for one the above mentioned it is advisory to consult an expert and balance the chances.

Chapter 7

Individuals are more inclined to use Chapter 7 bankruptcy known for its liquidation. This type of bankruptcy is simple and quick; usually debtors submit all non-exempt property to a trustee, which is liquidated and the payment distributed between all creditors. In the majority of cases people get a discharge of the remaining debts. There are instances when you are not eligible for debt discharge; these cases include child support, student loans or spousal support. A bankruptcy discharge does not extinguish a lien on property and can be filed by individual debtors, not corporations or partnerships. This type of bankruptcy is aimed to give the debtor a new financial start by paying back a part of their existing debts and the remaining discharged. Although this form of debt elimination can harm your credit score, in many cases Chapter 7 Bankruptcy is the only reasonable solution.

Chapter 13

Filing for Chapter 13 Bankruptcy of the Bankruptcy Code is usually done to manage to repay some of the existing overall debts on lower interest and better terms. Unlike Chapter 7 Bankruptcy, where assets are liquidated, in Chapter 13 debts are being restructured meaning debtors can use any type of income to pay off their debts in the future. In this type of bankruptcy debtors can keep their assets while the court decides about a new, interest free repayment plan. The debt repayment usually starts within 30-45 days after the case has started and a detailed repayment plan that suits your financial situation is made and approved by the court. A repayment in this case can be made even if creditors disagree as long as it is accepted by the court. In Chapter 13 Bankruptcy a full discharge from debt is available, which lacks in Chapter 7 Bankruptcy.