Often, the news is filled with reports of how the nation’s economy is improving. Statistics are presented that show higher employment figures or lower rates of inflation. While these are positive indicators, some Connecticut residents still find themselves in dire financial situations. These consumers may be considering bankruptcy as a means to get a fresh start with their finances. Therefore, it is important to understand the differences between filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy.
Chapter 7 bankruptcy is characterized by a total liquidation of one’s debts. Basically, a person’s assets are sold, and the proceeds are used to pay creditors. However, if someone has too much income or assets, he or she would be ineligible for Chapter 7. In most cases, only items deemed necessary for basic living would be exempt from liquidation. In this type of bankruptcy, there is no option to repay the debts.
Chapter 13 is commonly thought of as a sort of repayment plan. A detailed plan is established, typically for a three- to five-year span, that will allow consumers to repay their debts. A trustee receives these payments and remits them to creditors.
If a decision has been made to pursue personal bankruptcy, consumers may have difficulty in deciding whether to file for Chapter 7 or Chapter 13. A Connecticut bankruptcy attorney can explain the differences between the two types and help individuals determine which path is the best suited for them. A knowledgeable lawyer will work diligently with clients to help get them back on the right path with their finances.