Differences are Significant
Bankruptcy is never something someone should aspire to. In fact,
it is something that you should avoid at all costs. But if you
have no other choice, then it is something you have to go into
with your eyes wide open and all of the facts. The first thing
you want to do is try to handle your debt without getting the
bankruptcy. They will ask you if you have already tried the debt
consolidation or management options and if you have not, quite
often they will tell you to do that first, then go to a
bankruptcy lawyer. They do not want you to simply try to walk
away from your debt.
You will take a means test to determine if you qualify for
bankruptcy and if you do what kind. Once you have that completed
you will need to complete a credit counseling session to make
sure that you know what you are getting into and how you can
avoid it in the future. Then you have to decide if you are going
Chapter 7 or 13 if you have the choice. Chapter 7 is much more
severe in the damage it does to your credit, as you are
eliminating all of your debts. Chapter 13 you enter into an
agreement to pay a certain amount of your debts back, so you
won’t pay back everything you owe, but you will pay back a
portion of it.
You will make one payment a month to your trustee under Chapter
13, who will then distribute it to everyone that is supposed to
get their funds. Either way, there are things that cannot be
discharged like alimony and student loans, but you have to give
them a plan for repaying your debts under this filing. The court
then decides whether or not to approve, and you are on your way.
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