Filing for bankruptcy might sound scary, but it is actually a smart financial move if you are in deep debt. If you are at the point where you may need to file for bankruptcy, one of the most important things to remember is that there are two types.
The first type is Chapter 7 bankruptcy, which is the most common form of bankruptcy.
This is the type you are familiar with from movies and TV shows where the bank comes and collects people’s property as payment for their debt, whether that be their cars, boats or even their home. Filing for Chapter 7 bankruptcy in real life is not as dramatic, but you will need to reimburse your lender in some way.
In the case of Chapter 7 bankruptcy, you will be allowed to keep exempt assets, but will need to hand over non exempt assets to your lender to help pay back your debt. Exempt assets are usually assets that are necessary for living everyday life, like your phone and your home.
Non exempt assets are parts of your property that are not as essential to daily life, like a boat or other recreational vehicles. Exempt and nonexempt property may also depend on your specific lion and lender agreement, and the terms and conditions that apply to it.
The second type of bankruptcy you can file for is Chapter 13 bankruptcy. Chapter 13 bankruptcy is different in that your assets will not be ceased right away after you file. Instead, you will be given 3 to 5 years to repay your debt. To file for Chapter 13 bankruptcy, you will need to set up a feasible repayment plan that will satisfy your lenders with the help of a bankruptcy attorney.