While some people may believe that bankruptcy is a single process for anyone who wants to pursue it, in reality there are many different bankruptcy options available under the law. Depending upon whether it is a Colorado resident or business that wants to file, as well as their ability to meet the qualifications of their desired bankruptcy path, a person may end up engaging with bankruptcy in a very different way from someone else. This post will discuss two of the most common forms of personal bankruptcy and what makes them different.
Chapter 7 bankruptcy is sometimes called liquidation bankruptcy. This is because individuals who use it often have to sell off or liquidate their assets in order to generate money to pay off their creditors. However, any remaining debt may then be eliminated. This means that individuals with incomes and the means to pay off their debts often do not qualify for this drastic form of bankruptcy.
Those with some financial means may be better served through Chapter 13 bankruptcy. Chapter 13 bankruptcy is sometimes called reorganization bankruptcy. During a Chapter 13 bankruptcy process a debtor creates a repayment plan through which they budget to pay off their creditors over a period of years. Their discharge is granted when they successfully complete their repayment plan, with any remaining debt being potentially written off
There are many other differences that make Chapter 7 and Chapter 13 bankruptcies appropriate for different debtors. For this reason, individuals who want to learn more about bankruptcy should contact a bankruptcy attorney with whom they may discuss their options. Not everyone will qualify for all forms of bankruptcy, and legal guidance can smooth out the process for those who wish to use it to find financial freedom.