Bankruptcy is a viable option for many people who are drowning in different types of debt. Whether it is credit card debt, medical debt, or an inability to keep up with other loans such as car payments or a mortgage, bankruptcy filings affect different types of debt in different ways.
If you are considering filing for bankruptcy, you should learn more about how the different types of bankruptcy could affect your specific situation. Although the best solution is to consult with a bankruptcy attorney, the following information could help you get a general understanding before you turn to an attorney for a consultation.
Chapter 7 and Chapter 13 bankruptcy
Chapter 7 and Chapter 13 are the two types of bankruptcy filings available to individuals. They vary in how they treat and discharge debt. Chapter 13 is also considered debt reorganization or debt restructuring because it allows you to pay back a portion or all of your debt through a repayment plan. This type of filing can be a good fit for individuals with regular income. Chapter 7, on the other hand, is commonly referred to as a "fresh start" bankruptcy, as it allows for discharges of debt without a repayment plan. However, it also allows for the liquidation of your non-exempt property to pay back creditors.
Credit card debt and bankruptcy
Credit card debt is one of the most common types of debt that bring people to file for bankruptcy. You may file for either Chapter 7 or Chapter 13 bankruptcy to deal with credit card debt, depending on your individual circumstances. Since credit card debt is unsecured debt - that is, there is no collateral held to pay back the debt in the event of default on payments - it could be fully dischargeable in bankruptcy.
Generally, the best way to get a handle on how a bankruptcy filing could affect your debt is to consult with a qualified bankruptcy attorney. A lawyer who works with bankruptcy filings can analyze your particular debt situation and advise you on how to best proceed.