Which Bankruptcy is Right for Me?
Written by Lee Wyatt (last updated August 23, 2013)
When you find yourself in serious financial trouble, it only makes sense that you would ask yourself the question of "Which bankruptcy is right for me?" While many people would like to think that one bankruptcy will fit all situations, this is not the truth. Reality is that not everyone can, or even should, file for bankruptcy. If you are considering this drastic step, then make sure you are thinking about all of your options. Here are a few things that you can use to help you determine which, if any, bankruptcy will be right for you.
- Chapter 7. Chapter 7 is the type of bankruptcy that most people think about when they do think about bankruptcy. This is perhaps the single most traumatic kind of bankruptcy, and will require quite a bit of sacrifice on your part, in that you will need to sell of the vast majority of your assets and possessions. In fact, there are only a few things that you won't need to sell off, and most of those are related to you living on a daily basis. In addition, this type of bankruptcy will remain on your credit history for 10 years.
- Chapter 13. Unlike Chapter 7 bankruptcy, Chapter 13 is more along the lines of creating a formal payment plan for repaying all of your debts. This type of bankruptcy is often referred to as a restructuring or reorganizing bankruptcy. One of the more common uses for this type of bankruptcy is to avoid foreclosure, but you need to be aware that this doesn't always work in holding it off. Be aware that this type of bankruptcy will remain on your record for about seven years.
- Be aware of consequences. Regardless of how long the bankruptcy will officially remain on your credit history, this is a process that will affect the rest of your life. A very simple example of this is how many job applications will ask whether or not you have ever filed for bankruptcy, and how long ago it was. While, strictly speaking, a bankruptcy cannot be a single disqualifying factor in whether or not you get a job, it does play a role.
- Get counseling and advice. Before you make any decision regarding bankruptcy, you really should get professional advice. This means that you need to talk to both a professional credit counselor and a bankruptcy attorney. The attorney can tell you how the bankruptcy process will work in great detail, and which type of bankruptcy will work for you. A credit counselor can also help you determine whether or not you even need to file bankruptcy. Essentially, a professional should be able to give you advice that will better suit your exact needs and situation.