Which Bankruptcy Option Is Best

Bankruptcy is usually the last resort for people suffering with overwhelming debts. Some come to the conclusion that bankruptcy is the answer sooner than others, while others do everything in their power to avoid it and its consequences. If you have decided that there is no way out of your debt except to file bankruptcy, then you’ll want to consider the different types of bankruptcy in your quest for debt relief.

There are two main types of bankruptcies, which are filed under certain “chapters” or collections of law. The first is Chapter 7, where the debtor is relieved of all debt. The second is Chapter 11, where the debtor enters into a repayment agreement to pay off all or a portion of their debt. While the process of filing can be intimidating, understanding what each type of bankruptcy allows and requires will ease the burden of choice.

Chapter 7 Has The Greatest Relief

However, some people are in a dire situation that goes deeper than expected and will require the option to dissolve certain properties to cover some debt, then relieve the debtor entirely of their obligation. While you have the greatest relief, and the same protection as Chapter 11 from collectors, it does have the longest and most negative impact on your credit. You can expect to no longer be able to get even credit cards or bank accounts for at least 3-5 years. This will require creativity in managing your future finances, such as with pre-paid cards.

 Chapter 11 Has The Least Credit Impact

One reason you’d choose Chapter 11 bankruptcy is that it remains on your credit record for less years and allows for a faster recovery of credit with your integrity intact. By actually paying off all or a portion of your debt, companies that require a credit report in the future will look more favorably upon your situation. It also provides you protection from your creditors, and stops all collection efforts. This relieves a great deal of stress on your part, meaning no more menacing calls, emails or letters threatening legal action.

Chapter 12 Is For Farmers And Fishermen

Chapter 12 bankruptcy is designed specifically for family farmers and fishermen. It is similar to Chapter 11 and Chapter 13, but more streamlined. It is often a faster process, and the regulations are simplified for ease of filing (relative to other corporate bankruptcies).

Chapter 13 Helps When Behind

Chapter 13 bankruptcy terms do not dismiss debts, but rather rearrange obligations to pay off secured debts that are behind in payments. This is best for home or car owners, for example, that want to keep their property, have a regular income, and simply can’t catch up after a financial crisis put them in arrears. With Chapter 13, you have a maximum of 5 years to “catch up” on your debts, and are supervised by the courts.

Regardless of which type of bankruptcy you choose to pursue, rest assured that working with an attorney will ease the burden of paperwork and finesse the process through the courts without a huge headache. While each has its unique requirements and rules associated with it, ultimately, they are all meant to be of assistance to those who have faced hard times at some point in their life or career.