Bankruptcy is a topic that many Texas residents have likely heard of but do not know a lot about. Whether they become familiar with it through television programs or the stories of neighbors and others, many people understand that bankruptcy has to do with dealing with debt when a person can no longer make their payments. There are two primary forms of personal bankruptcy that individuals can choose to pursue when their overwhelming debts are no longer within their control: Chapter 7 bankruptcy and Chapter 13 bankruptcy.
Though both forms of bankruptcy deal with eliminating debts, they are quite different in terms of who may use them and how they function. This post will offer a few pieces of information on the differences between Chapter 7 and Chapter 13 bankruptcy. This post is informational and content and does not provide any legal advice, and readers with bankruptcy questions can choose to speak with their trusted legal advisors about their individual debt situations.
Chapter 7 bankruptcy
Chapter 7 bankruptcy is for individuals of limited income and who do not have disposable income to use to pay off their debts. When they file for bankruptcy, they will ultimately liquidate or sell off items of property and assets to repay their creditors. Chapter 7 bankruptcy is an option for those who have overwhelming debts but do not have the incomes to pay them off over a period of years.
Chapter 13 bankruptcy
Chapter 13 bankruptcy is also for individuals, but those who qualify for it have disposable income. That means after they pay for all their necessities, they still have some money left over. Individuals who pursue Chapter 13 bankruptcy create repayment plans that may last for a period of years which uses their disposable income to pay off their creditors. Different debts and creditors may have different priorities, and individuals must look at which creditors should be paid off first when making their repayment plans.
As readers can see, the two forms of personal bankruptcy often used by individuals can take very different paths and have very different requirements. Before filing for any form of bankruptcy, individuals can benefit from seeking the advice of bankruptcy attorneys who work in their communities.