How Does Filing for Bankruptcy Work in Two Options
Sometimes it’s scary to face a filing for bankruptcy, and this led the people to ask about how does filing for bankruptcy work? If you a bankruptcy problem, the thing you need to do first is to calm down yourself. There will always be choices for you every time you face a financial problem. Bankruptcy itself also sometimes is an option. But it is better to know the risk and the policies about it. Everything about how do filing bankruptcy work will be explained here.
For those who didn’t understand much about filing bankruptcy, we will provide some basic information about it. First, you need to understand the term of bankruptcy. Bankruptcy defines as a federal laws system that allows both business and individual to get an id from the debts so they can have new a financial start.
There are two main types of bankruptcies for the individual. It called chapter 7 and chapter 13. An individual can choose one type only. How both of them work will be explained below. Each explanation represents the answer to the question how do filing bankruptcy work.
How does it work?
We will explain about the chapter 7 first. For those who asked how does filing Chapter 7 bankruptcy work, please pay attention to the next paragraph that will describe and explain about it.
Chapter 7 bankruptcy is also known as liquidation. It works by liquidating all of your non-exempt assets to pay your creditor. If you choose this option, most of your unsecured debt will be charged, and you will be required to do some test. Many people choose this option as their filing bankruptcy option because they have a significant amount of unsecured debt such as credit card and having a little income.
While for those who ask about how does filing Chapter 13 bankruptcy work? here is the explanation about it. The way it works is different from the previous type.
Chapter 13 bankruptcy is also known as reorganized. It works by reorganizing your debt through a repayment plan. This option will force you to pay back to your creditor too. Not like the chapter 7, in this option, there will be no property that needed for the liquidation process. This option is required a regular monthly payment and to have this option you need to provide your monthly income data. This is a good option if you have a permanent income.
The advantages and disadvantages of filing bankruptcy
The advantages when you decide to file the bankruptcy, in general, are including an automatic stay which means that you are no longer pay for the creditor and you will not repay them too if you did the bankruptcy successfully.
The disadvantages are including that you can suddenly lose your property and it can devastate your credit score. And the truth is that filing bankruptcy doesn’t always mean fixing any financial issues.
If you want to file bankruptcy, it is better to consider many things such as understand your debt situation, your monthly income and understand that it takes cost and requirements.