If you’re struggling with your finances, then something you may have started to think about is going through bankruptcy. Bankruptcy can help you get back on your feet financially speaking, but it’s also a potential risk. Bankruptcy can have long-lasting implications, and certain types of bankruptcy may require you to give up assets in exchange for debt relief.
The good news is that most people don’t have to lose much in bankruptcy, if anything at all. Here’s a little more information about the two main kinds of bankruptcy and how they could affect your assets.
Chapter 7 bankruptcy
With a Chapter 7 bankruptcy, there is the greatest risk of having to give up your assets. This is because a Chapter 7 bankruptcy is a liquidation bankruptcy. Any items that are not part of your exemptions may have to be given up in exchange for debt relief. The assets you lose will be sold, and they’ll then be used to repay your creditors.
The good news is that most of your necessary items, like a primary vehicle up to a certain value or your clothing, will usually be protected under exemptions. If some items you want to keep aren’t in the main group of exemptions, you may be able to use a wildcard exemption to make them off-limits to your creditors.
Chapter 13 bankruptcy
If you’re still earning a wage and think you can repay what you owe with support, then a Chapter 13 bankruptcy may be a better choice. This sets you up on a repayment plan for the next three to five years, depending on your income. With this process, you will not have to lose any of your assets. Once you have paid on time for the length of the bankruptcy, you’ll have any remaining debts discharged. This process takes longer, but it protects your assets.
Either of these bankruptcy forms could be right for you. You may want to speak to your attorney about the different options and which might be best for your case. Everyone’s finances are different, so it may take time to figure out which one will work in your situation.