If you are struggling to pay medical bills, credit card debt or even living expenses, you are in good company. In fact, the average American has more than $90,000 in outstanding balances to pay. Still, having more debt than you can afford may ruin your quality of life.
Filing for bankruptcy protection may help you both to address your debt in a proactive way and to work on building a brighter financial future. Still, you may worry you stand to lose all your assets during the bankruptcy filing. This is probably not the case, however.
Chapter 13 bankruptcy protection
Two types of bankruptcy protection are popular with individuals: Chapter 13 and Chapter 7. With Chapter 13 bankruptcy, you come up with a repayment plan for your debt. This type of bankruptcy typically allows you to keep all or most of your property, although you likely must make monthly payments for a few years.
Chapter 7 bankruptcy protection
Chapter 7 bankruptcy works differently than Chapter 13 bankruptcy in a critical way. With Chapter 7, you do not repay debts. Instead, the bankruptcy trustee sells your assets to satisfy your creditors. You are not likely to lose all your assets for a couple reasons, though.
First, there are many exemptions in bankruptcy law. If your assets fall into an exempt category, you do not have to part with them. Second, even if your assets do not qualify for an exemption, the cost of securing and selling them may be too significant to be worthwhile to the bankruptcy trustee.
Ultimately, which type of bankruptcy is right for you probably depends on a few factors. Whether you choose Chapter 7 or Chapter 13 bankruptcy protection, you may not want to let the possibility of losing assets dissuade you from taking control of your finances.
