If you are one of the scores of Pennsylvania residents facing financial challenges, you may be wondering about the benefits of bankruptcy. Maybe you have heard that the new bankruptcy laws require you to repay all of your debt, no matter who you are. According to bankruptcy attorneys, that assertion is a myth. Chapter 7 and Chapter 13 bankruptcy can both provide financial relief for those facing various types of debt. It is up to you and your bankruptcy attorney to determine the right type of bankruptcy for your individual situation.
In Chapter 7 bankruptcy, or liquidation bankruptcy, filers are able to discharge the vast majority of their consumer debt. To qualify for this type of bankruptcy, you need to meet certain income restrictions, and the value of your expenses must exceed that of your assets. Further, Chapter 7 bankruptcy is generally useful for those who do not own a home or other major holding that they are not willing to sacrifice.
Chapter 13, on the other hand, involves the reorganization of debt into a more manageable structure. Some debt can be erased through this process, while others are just payed back at a slower rate. Chapter 13 usually includes a repayment plan, and it is a great option for those who have assets with equity that they are not willing to sacrifice.
In both types of filings, there are certain types of debts that absolutely cannot be discharged. These can include certain student loans, legal judgments, specific taxes, alimony and child support, among others. A good rule of thumb is to consult your bankruptcy attorney to determine whether a debt can be discharged. Some debt collectors will try to tell you that you cannot discharge the money you owe them; in some cases, they are just hounding clients for money. Make sure to get an expert opinion to determine whether filing for bankruptcy is the right financial choice for your situation.
Source: Credit.com, "Will Bankruptcy Wipe Out All of My Debt?" Gerri Detweiler, Apr. 18, 2014