Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the most common type of bankruptcy that a consumer or individual files. It is known at the “Fresh Start Bankruptcy”. In a Chapter 7 bankruptcy all of a person’s unsecured debts, like payday loans, credit cards, and medical bills, are discharged. The “Discharge” means that the debt is eliminated and a person cannot be held responsible for those bills any more. The idea is that an individual will get a fresh start in their financial life.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is a type of bankruptcy used by an individual to reorganize their debt. It is commonly known as a “Plan of Reorganization”. The most common reason for a person to file for Chapter 13 Bankruptcy Relief is to prevent the foreclosure and liquidation of a major asset. This is typically are a house or a car. Less commonly, an individual may seek Chapter 13 relief to address IRS issues, back child support or other governmental obligations. Finally, if a person does not qualify for a Chapter 7 Bankruptcy due to income or the possibility of losing assets, that person may wish to file for Chapter 13 Bankruptcy.