There are two main types of personal bankruptcy under the United States Bankruptcy Code -- Chapter 13 and Chapter 7.
Chapter 13 is a great alternative when:
- Your facing foreclosure or repossession and you want to catch up your payments.
- You have lots of equity in your home or other property but you need to eliminate or consolidate other debts.
- You want to lower the payment and interest rate on an automobile.
- You want to eliminate the second mortgage on a home that is not worth what's owed on the first mortgage.
- You have regular income of some sort and can pay your basic living expenses but need a little help with the other debts.
Chapter 7 is a great alternative when:
- You don't have a lot of personal property worth a lot of money and your home that you are purchasing doesn't have lots of equity in it.
- You want to completely eliminate unsecured creditors like credit cards, collections, medical bills, personal loans -- basically any debt without collateral attached to it.
- You want a fresh start and want to clear your credit and start over immediately.
- You don't have much money left over after paying your basic living expenses.
* Contrary to myths out there, you don't have to give up your house, car or furniture if you file a Chapter 7.