As we have previously noted for our readers throughout Texas, consumer bankruptcy can owe to one or many interrelated factors, with every case being unique.
In recent years, those factors have been on firm display across the country, with tough economic times highlighting the stiff challenges that many individuals and families nationally are facing across a broad front.
Credit cards are often used, for example, to pay for unexpected medical crises. Home values have plummeted, resulting in a massive number of foreclosures across the nation. Student loans, car loans, unpaid back taxes … all these exactions and more have resulted in economic dislocation for many debtors.
Thankfully, the nation’s bankruptcy law provides for relief and an opportunity for struggling consumers to regain firm financial footing. After determining that a bankruptcy filing might be the right course to pursue, though, many people are left pondering this question: What type of bankruptcy should I be focused upon?
That is certainly a valid inquiry, because Chapter 7 and Chapter 13 — the two types of bankruptcy options most commonly invoked by consumers in the United States — share some common features and yet also are markedly different in important ways.
The terms “liquidation” and “reorganization” go far toward explaining how Chapter 7 and Chapter 13 differ. The former term, commonly associated with Chapter 7, highlights the primary function of that bankruptcy form to erase unsecured debts such as medical bills and credit card balances. The reorganization aspect commonly attached to Chapter 13 emphasizes the restructuring of debt through a payment plan to creditors over time.
A firm knowledge of both types of bankruptcy forms, along with an understanding of which type is most beneficial in a given case, can be gleaned through candid and confidential discussions with a proven bankruptcy attorney.
Source: Nolo.com, “What is the difference between Chapter 7 and Chapter 13 bankruptcy?” Baran Bulkat, undated