For many Californians, it doesn’t take much for their financial stability to be uprooted. If you’ve suffered an unexpected medical condition or lost your job, then you know just how stressful and crushing debt burdens can be. Some people spend years or decades trying to free themselves of these financial constraints, oftentimes turning to second or third jobs, or relying on payday loans to get by. Sadly, though, these efforts usually aren’t enough, and can in fact deepen the hole you’ve fallen into.
If you feel like there’s no hope for your financial future, then you need to know that there’s hope. Real debt relief can be obtained. In many instances, the best way to achieve a fresh financial start is to pursue personal bankruptcy. Although bankruptcy often has a stigma associated with it, it really shouldn’t. Millions of Americans avail themselves of the relief provided by bankruptcy, and you can, too.
There are two main types of personal bankruptcy can you can pursue. Below, we discuss the two most common types of bankruptcy so that you can determine which, if any, is best for you.
Chapter 7 bankruptcy
This type of bankruptcy is often referred to as liquidation. This means that many of your assets will be sold, and the proceeds will be used to pay off your creditors as much as possible. There are exemptions that allow you to keep certain assets so that you’re not left without any possessions or financial resources. Those exemptions include, in varying amounts, the following:
- Your vehicle
- Home furnishings
- Material to be used in repairing your residence
- Jewelry and heirlooms
- Tools and equipment
- Some retirement accounts
- Some health benefits
This is not a complete list of exemptions, and its important to note that there are limitations on the value you can claim under each category. However, most people think that Chapter 7 leaves with nothing. This simply isn’t the case.
There are certain requirements that must be met before qualifying for Chapter 7, such as the completion of credit counseling and passing a means test. But, even if you’re income is too high to qualify for a Chapter 7 bankruptcy, you can still pursue Chapter 13.
Chapter 13 bankruptcy
This type of bankruptcy involves the creation of a repayment plan based on your income. The repayment plan may last as long as 60 months and results in debt discharge upon successful completion of the repayment plan.
Some people pursue Chapter 13 because they don’t qualify for Chapter 7, but there are other reasons to consider it. One of the biggest is that it allows you to keep all of your assets. Additionally, Chapter 13 can buy you more time to make up overdue payments on your home, car, or student loans. This can help protect your collateral and avoid foreclosure and repossession once the bankruptcy process is complete.
Bankruptcy can be a challenging process, but it can also ease an enormous burden off your shoulders when handled properly. To make sure you are knowledgeable and position yourself as best as possible to secure that relief, it might be in your best interests to discuss your unique set of circumstances with an experienced attorney.