In this economy, many people find themselves facing difficult financial situations.  Certain circumstances such as unexpected medical bills, credit card bills, and divorces can surely present further challenges. When the burden of debt becomes overwhelming, many believe filing bankruptcy is their only option. Bankruptcy can be broken up into two categories:
Chapter 13 Bankruptcy- In this type, the debtor proposes a plan to repay creditors over a three to five year period during which the debtor can make up overdue payments on any assets and pay into the plan the equivalent value of any assets not covered by exemptions. Exemptions refer to properties that the law allows for the debtor to keep. The debtor will then make regular payments to creditors through a trustee and will not be discharged of the debt until the payments are complete. The debtor is, however, protected from wage garnishments, lawsuits, and other creditor action while making the payments.
Chapter 7 Bankruptcy-This type requires the collection of the debtor’s assets by a trustee who then distributes the cash obtained from those properties to creditors. In order for creditors to receive any money from the assets, they need to file a claim with the bankruptcy court which will deem their claim justified as it sees fit.
