(Mybrotha.COM) - For starters, there are generally two types of Bankruptcy that consumers can file, Chapter 7 and Chapter 13, and understanding the distinctions is very important.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is designed to provide relief by discharging mostly all debt, secured and unsecured Some examples of unsecured debts Chapter 7 may eliminate are credit cards; deficiencies on repossessed vehicles; medical bills; and most loans. In addition to getting rid of your debt, Chapter 7 allows the filer to keep his property, through reaffirmation, as long as the payments are current, and there is no significant equity in the property. The one caveat about Chapter 7, is that there are income limitations to how much a person can make who wishes to file Chapter 7. In general, most Chapter 7 cases take between 60 to 90 days to close from the date of filing.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is more or less a way of reorganizing debt by reducing unsecured debt and allowing the individual to keep his/her property and entering into a payment plan to relieve the debt. In Chapter 13 bankruptcy, the person consolidates his debts and makes a payment on the debt over a 36 month to 60 month period. Contrary to Chapter 7 Bankruptcy, in order to file Chapter 13, the person must be working or have a consistent source of income to be approved. Debts that are generally consolidated in a Chapter 13 bankruptcy are mortgage arrears, balances on vehicle loans, student loans, credit card debts and other unsecured debts.