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Two most common types of bankruptcy

It doesn't matter where you live in the state of Florida, if you are faced with financial difficulties it is important to consider all your options for finding relief. The two most common types of bankruptcy are Chapter 7 and Chapter 13. While there are some similarities, there are many differences to take into account.

Before you file for any type of bankruptcy, you need to know your options as well as how the case will proceed.

Chapter 7 is known as a liquidating bankruptcy. While you can have some or all of your debt discharged, you will have to turn over particular assets to the trustee in charge of your case. Upon selling your assets, the money is then used to pay creditors.

Those who do not qualify for Chapter 7 bankruptcy often consider filing for Chapter 13. With this approach, you will use a repayment plan to pay back some or all of your debt over a period of three to five years. One of the primary benefits of Chapter 13 is that you are able to catch up on past payments, allowing you to keep the asset, such as a car or home, as opposed to handing it over to the trustee.

There are pros and cons of both types of bankruptcy, as well as a different process associated with each one. The decision you make will impact you in many ways, so it is important to understand the finer details of each type of filing. Those who have questions or concerns often consult with a bankruptcy attorney before making a final decision.

Source: The Florida Bar, "Some Information about Bankruptcy" Dec. 02, 2014

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