Diana Metz`s Finance Blog

When most people think of claiming bankruptcy, they think that all they have to do is file and all their debts will go away. This isn’t really the case however. There are different types of bankruptcy, and the laws have gotten stricter about who can file so you might not be able to file at all.

The types of bankruptcy that are most common for individuals are Chapter 7 and Chapter 13. Chapter 7 bankruptcy is the one where your debt gets discharged, and Chapter 13 is the one where you have to follow a payment plan for a number of years and try to pay off your debt.

Regardless of which of the types of bankruptcy you file under, there are some types of debt that cannot be discharged, including taxes and student loans, fines, property settlements, and domestic support, among other things. Both types also require you to attend credit counseling by a recognized non profit agency before your debt will be discharged.

In order to file for Chapter 7 bankruptcy you need to meet the means test. Then you are allowed a certain amount of property that is exempt, and the rest can be sold in order to pay off as much of your debt as possible. Once that is done the rest of your qualifying debt can be discharged. Creditors will have sixty days to contest the debt which you have with them being discharged.

With Chapter 13 bankruptcy you can only file if you have under a certain amount of debt. That means if you have too much debt you won’t qualify. You will be put on a payment plan which you will have to complete before the remaining qualifying debt will be discharged. You end up paying off a good proportion of the debt.

In order to figure out how to declare bankruptcy, it is best to hire a lawyer to help you through the process. He or she will be able to figure out which type of bankruptcy you should file for and help you through the process so that you can make sure that everything is done properly and that you will have the best possible chance of succeeding in your claims.