An explanation of bankruptcy

When a person in Minnesota who has significant amount of debt is thinking of filing for bankruptcy, it is important for them to know the difference between Chapter 7 and Chapter 13 bankruptcy. For example, Chapter 7 involves a discharge of debts while Chapter 13 restructures the debts.

Chapter 7 is the easiest form of bankruptcy, but it may not be right for everyone. The action discharges unsecured debts, which includes credit card debt, medical bills and payday loans. However, it does not include child support, alimony, student loans and some other debts. Also, those who file for the Chapter 7 must meet the certain income requirements, and they may have to participate in credit counseling.

Chapter 13 bankruptcy offers a way for a person to pay some or all of their debt back over a period of time. This person must have a stable source of income and be able to show the court their plan to repay their debt. In order to pursue a Chapter 13 filing, the debtor must provide names and addresses of creditors along with the amounts owed, and after the filing has gone to the court, an automatic stay is enforced, protecting a debtor from further action. The filing can protect certain assets, such as a house or vehicle.

A lawyer who has understanding in bankruptcy law may help a person with the filing process, allowing that individual to pursue a fresh financial start. A bankruptcy lawyer might also help a client evaluate his or her financial situation and suggest other forms of debt relief.

Source: Ebony, "The Different Degrees of Bankruptcy, Explained", Lynnette Khalfani-Cox, June 19, 2014

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