Here we are only covering two types of bankruptcy – Chapter 7 and Chapter 13 – they are both personal bankruptcies. Before proceeding I want to warn you that bankruptcy is very damaging to your credit and most of the time you do have alternatives for debt relief such as: debt settlement, debt consolidation, credit counseling. You can always get a free consultation from a debt specialist who will help you find the debt relief option which will be most suitable for your needs.

Chapter 7 Bankruptcy is available as relief irrespective of the amount of your debts or whether you are solvent or insolvent - assets exceed liabilities or liabilities exceed assets. One of the primary purposes of chapter 7 is to give an honest individual, like you, a fresh start. You have no liability for discharged debts.

In Chapter 7, bankruptcy trustee gathers and sells your nonexempt assets and uses the proceeds of such assets to pay creditors. Part of your property may be subject to liens and mortgages that pledge the property to other creditors.

To be eligible for filing Chapter 7 bankruptcy protection you first have to pass a “means test” – this test shows whether your monthly income is above or below the state median (passing means you have to be below the average). Also, you need to complete a required pre-filing session with a credit counselor.

Click here for free consultation to avoid bankruptcy

A few advantages of Chapter 7:

• Most unsecured debts can be discharged (completely eliminated).
• The process moves quickly—you may receive your discharge in just a few months.
• Creditors can't contact you while the automatic stay is in effect—or after debts are discharged.

Chapter 7 is most effective when:

• You have little property except for the basic necessities like furniture and clothing.
• You have little or no money left after paying basic expenses each month—or you're not even meeting basic expenses.

Chapter 13 Bankruptcy You are eligible for Chapter 13 as long as your unsecured debts are less than $336,900 and secured debts are less than $1,010,650. You must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling.

Chapter 13 offers you a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers an opportunity to save your home from foreclosure. By filing under this chapter, you can stop foreclosure proceedings and may cure delinquent mortgage payments over time.

A few advantages of Chapter 13:

• You can keep most of your property while spreading out time to pay past due accounts.
• You'll have 3-5 years to catch up delinquent accounts according to a schedule that you and the bankruptcy trustee have agreed is workable for you.
• You'll make one monthly payment to the bankruptcy trustee for distribution—you'll have no direct contact with creditors during the protection period of 3-5 years.
• Co-signers may be protected.

Chapter 13 is most effective when:

• You have significant equity in a home or other property and you want to keep it.
• You have regular income and can pay your living expenses, but you can't keep up the scheduled payments on your debts.

To apply for any type of bankruptcy, you will need to speak to a bankruptcy attorney. Remember that bankruptcy stays on your credit history for 7 years! Before you turn to bankruptcy, there may be another solution.

Click here for free consultation to avoid bankruptcy