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- Choosing the Right Type of Bankruptcy
Generally, there are 2 types of bankruptcy that can be used in most cases: Chapter 7 and Chapter 13.
This is the type of bankruptcy that is most often used by individual debtors. An individual or married couple is able to wipe out their debt by taking property and liquidating it. The money from the property will be used to pay off the debt. In some states, certain property can be retained but only if it is exempt under the bankruptcy laws. Generally this will be cars and homes that are in good standing with their creditors. In some states, you will lose your home because it is the fastest way to get out of debt although it will mean that you have no assets left.
In Chapter 13 bankruptcy, the debtor and creditor work out a plan that will allow the debtor to pay off his or her debt in a payment plan. Most of the time, this process happens through the individual's paycheck . As long as the payment plan is in effect, the creditor will not lose your home or other possessions.
When determining what type of bankruptcy is best for you, it is important to think about which type of bankruptcy will damage your credit the least.