The term "bankruptcy" is generally used to denote a procedure whereby debts are discharged, but few people are aware that there are various types of categories that a person can file under, depending on various factors. When it comes to personal bankruptcy, it is possible to file under Chapter 7 or Chapter 13 bankruptcy. How can someone decide which one to file under?
The most important factor is income. In order to become eligible for Chapter 7 bankruptcy, the filer's income must fall within a specific limit and the filer must be able to fulfill the means test laid out by the law. On the other hand, if someone has a regular monthly income, it may be in their best interest to file under Chapter 13 bankruptcy, as it allows them to adjust their debts according to their income.
Both bankruptcy plans allow debtors to retain possession of a number of assets, but under Chapter 7 bankruptcy it is possible that some assets are liquidated in order to repay creditors, whereas under Chapter 13 it might be possible to prevent assets from being liquidated as the debts are being repaid over a number of years through the debtor's own wages.
Everyone's personal financial challenges and situations are different, and luckily there are different bankruptcy options that could possibly suit their circumstances. Once an Arizona resident has decided to declare bankruptcy, it is important to make sure the individual is filing under the correct chapter, one that they are eligible for and would benefit them.
Source: United States Courts, "Chapter 7-Bankruptcy basics," Accessed on November 16, 2015
