Deciding on the best personal bankruptcy option

Arizona residents may not view bankruptcy as an ideal solution to their financial problems. However, it can be a helpful step in recovering from challenging circumstances such as a medical emergency or a long period of unemployment. There are two primary options for personal bankruptcy, Chapter 7 and Chapter 13, and each has its own benefits as well as requirements.

The primary difference between filing for Chapter 7 and Chapter 13 is how debts are handled. In a Chapter 7 case, unsecured debts are typically discharged soon after the process is initiated. The debtor's non-exempt assets are liquidated with the proceeds going towards repayment. Chapter 13, however, involves the development of a repayment plan that will span a period of between three and five years. During this period, the debtor's disposable income is dedicated to paying creditors, and a discharge of remaining amounts may occur at the end of this repayment period, assuming that the terms of the plan have been complied with. Both types of bankruptcy allow for collection activities to be halted, an important step for those who have been distressed by aggressive and harassing tactics.

Some individuals may not be eligible for Chapter 7 because of their financial means, and some may choose Chapter 13 because of a desire to keep certain assets that are secured by a loan. Debts related to support orders, judgments, and federal obligations such as taxes are in most cases not discharged during bankruptcy.

An individual who wants to file for bankruptcy may want to seek legal assistance to ensure that all necessary steps are completed in a timely manner. This may also provide an opportunity to further compare options so that the most beneficial and appropriate form of debt relief is selected based on personal needs and financial goals.

Source: American Bar Association, "General Comparison of Chapter 7 and Chapter 13 Bankruptcy ", accessed on March 10, 2015

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  • MCBA | Maricopa County Bar Association
  • State Bar of Arizona
  • ABA | American bar Association | Defending Liberty Pursuing Justice
  • Oregon State bar
  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
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