What Is Bankruptcy? The Basic Types Chapter 7 and Chapter 13

Bankruptcy laws are available to help people who can’t repay debts get a discharge from the legal obligation to repay the money owed.  It is available to honest people who, after paying for necessary living expenses, have no funds left to make payments on their general debts.

Bankruptcy relief is so important to the concepts that America was founded on that is included in the United State Constitution as something that Congress could create and regulate.

If you can remember your grade school history, a basic premise of the founding of America was that there would not be a debtor’s prison.

Filing for bankruptcy gave people the opportunity to truly escape their debts and get an opportunity to get a fresh start.

There are  different kinds of bankruptcy cases, but most ‘regular’ people consider either Chapter 7 or Chapter 13.

Chapter 7 is appropriate when someone has debt they can’t pay back, and there isn’t enough monthly income to make payments on the debts.  Chapter 7 debtors are looking for a the ability to start over with a quicker resolution of their financial problems.

Chapter 13 might be a better option for people who can pay some of their debt even if they are not able to pay it all.

Chapter 13 can help stop foreclosures and car repossessions and allow a workout on the payments due which is more affordable.

Chapter 13 can write down unsecured debts too, but sometimes it helps pay some or all of the debts owed.  Perhaps they can pay in full, but not as fast as the creditors want.

The goal of Chapter 13 is to provide debtors with an affordable plan that they can live with.

Either way, bankruptcy should be a positive action that helps people get back on their feet.