Which Type of Bankruptcy Should You File?

Millions of Americans consider and file for bankruptcy every year. They feel overwhelmed by their debts, such as credit cards or fees from bail bonds, and do not want to think about them anymore. These men and women feel like they have no other options. But the process is more complex than simply writing off debts and restarting one’s financial life. Instead, individuals have to talk to experts and become familiar with many of the intricacies of debtor protection law before they consider starting the process.

Chapter 13 bankruptcy

Chapter 13 bankruptcy is one of the more common types of bankruptcy. This approach is more of a restructuring of debt than any sort of debt forgiveness. The early steps are still the same. A person still submits the required petition and then has a stay issued against their creditors. The creditors cannot come after them while they are under the early stages of protection. In this form of debtor protection, a person still agrees to pay off their debts in one way or another. They may decide to pay off the full amount of their debt or a significant portion of that debt. They reach an agreement with the help of their creditors and a judge to decide exactly what amount they should pay off. All of the parties involved create a schedule and come to an agreement. The difference between this form of debtor protection and simply continuing with one’s debts is that the amounts are often much smaller and are not boosted by constant interest payments. People often have a better chance of paying off their debts in this form. But because the process still is not paying off debt, it causes a number of problems with an individual’s credit score. People filing for this protection still cannot easily borrow money for a number of years.

Chapter 7 bankruptcy

Chapter 7 bankruptcy is the most common form of insolvency. It is an example of the types of bankruptcies that most people think about when they are considering the process. The first step to this process is to make a petition to a judge. This petition involves a person laying out their debts and asserting that they are unable to pay off those debts. If the judge grants the petition, they issue a stay and keep a person’s creditors away from their home and assets. The court then determines what assets should be sold off and which can be protected. Different creditors are paid different amounts and they lose the rest of the debts they are owed. A person’s credit is then considerably harmed for the next seven years.

What to do

Anyone who is considering filing for debtor protection needs to first seek the help of a financial professional. This individual will go over a person’s financial situation. Anyone who is considering the process could benefit greatly from their help. They offer many different alternative approaches that a person can take when they are looking at jumping into the process. If bankruptcy is still a necessity for an individual, that individual needs to look at the different types of bankruptcy and find out what type is right for them. Then, they need to have realistic expectations about their financial situation and their lives during and after insolvency. They need to be willing to part to a certain degree with most of their assets. They need to also prepare to live for many years without being able to borrow money except at extremely high-interest rates. In some cases, these stipulations are well worth the ability to get out of a crippling spiral of debt.


The process of declaring insolvency, whether it is Chapter 7 bankruptcy or Chapter 13 bankruptcy, is never one that an individual should consider lightly. They should look at all possible alternatives and strongly consider numerous alternatives to the process. If they decide the process is inevitable, they should be careful and make sure they are picking the approach that best fits their needs. This evaluation is crucial to ensuring that a person goes through the process as painlessly as possible.