Law Offices of Thomas K. McKnight - Personal Bankruptcy Lawyer
Types of Personal Bankruptcy
When it comes to individuals, as opposed to companies, there are two common kinds of bankruptcy: Chapter 7 and Chapter 13. Below is a brief description of how each type works:
Chapter 7: This kind of bankruptcy essentially liquidates your assets in order to pay your creditors. Some assets-- typically including part of the equity in your home and automobile, personal items, clothing, tools needed for your work, pensions, Social Security, and any other public benefits-- are exempt, meaning you get to keep them.
However your remaining, non-exempt assets will be sold off by a trustee assigned by the bankruptcy court and the proceeds will then be distributed to your lenders. Non-exempt assets may consist of property (besides your main residence), recreational vehicles, boats, a second automobile or truck, collectibles or other valuable items, bank accounts, and investment accounts.
At the end of the process, the majority of your debts will be absolved and you will no longer be under any obligation to pay off them. However, particular debts, like student loans, child support, and taxes, can not be discharged.4 Chapter 7 is generally chosen by individuals with lower income and few assets.
Chapter 13: In this type of bankruptcy, you are allowed to keep your assets, but must agree to repay your debts over a given period of three to five years. The trustee collects your payments and distributes them to creditors. Chapter 13 bankruptcy is usually chosen by individuals that want to keep their non-exempt property intact or buy time against foreclosures or property seizures.