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Which Bankruptcy is the Right Fit for You?

If you find yourself in a financial danger zone, it will be prudent on your part to consider bankruptcy. There are certain telltale signs indicative of your ill financial health that may make bankruptcy an option.

If you are…

…forced to use credit cards for everyday necessities.

…only able to make minimum payments on your credit cards and unable to pay in full.

…get frequent calls from your creditors and collectors for repaying their money.

…running scared from sorting out your financial mess.

…not knowing how much you owe to whom.

…actively considering debt consolidation.

If you think that you owe more than you can afford to pay, you become an automatic contender for bankruptcy. To exactly determine your financial health, add up all your liquid assets, including college savings accounts, non-bank account funds, bonds, retirement funds, stocks, real estate, vehicles, etc. Now, add up all your bills and credit statements.

If the amount of debt you owe is more than the value of your assets, you can get out of a sticky financial situation by declaring bankruptcy. Although not a cure-all option, bankruptcy may save you from the actions of your creditors.

Types of bankruptcy

  • Chapter 7 bankruptcy: Referred to as ‘straight bankruptcy’, Chapter 7 bankruptcy helps liquidate assets to pay off as much debt as possible. In this, your assets are sold and the cash collected is distributed among your creditors, such as banks and credit card companies. Chapter 7 is not the best option for you if you own a company, a family home or any other personal assets that you want to retain.
  • Chapter 13 bankruptcy: Also known as ‘reorganization’ bankruptcy, Chapter 13 bankruptcy allows you to retain your property. It enables you to repay your debts in a timeframe of three to five years. This bankruptcy also offers a grace period to those who have a consistent annual income. It also prohibits the creditors from contacting you and lets you keep your possessions. What’s more, any debts remaining at the end of the grace period get discharged.
  • Chapter 20 bankruptcy: This bankruptcy comes into play when your financial problems are not completely solved by either a Chapter 7 or a Chapter 13. In some cases, it provides more relief than filing a Chapter 7 or a Chapter 13 bankruptcy, individually. Basically, a Chapter 20 bankruptcy allows you to discharge your unsecured debts through a Chapter 7 and then file for a Chapter 13 bankruptcy to catch up on mortgage payments or pay off non-dischargeable priority debts.
  • Chapter 12 bankruptcy:

Basically meant for ‘family farmers’ and ‘family fishermen’, Chapter 12 bankruptcy is a recent addition to the bankruptcy laws. It helps in restructuring your finances and in preventing liquidation and foreclosure of your assets. Although similar to Chapter 13, it also provides additional benefits to the debtors.


If you are in dire financial straits and are considering bankruptcy, it is important to know which bankruptcy to file to get full benefits. For this, a qualified and competent bankruptcy lawyer is a must.