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It is important to make smart financial decisions throughout your life because the economy is very unpredictable. If you are interested in investing in some risky ventures with the hope of big payoffs, that is fine as long as you know you can cover your debt. Never give away more that you can lose. If you feel like you have insurmountable debt, however, and you feel like declaring bankruptcy is the only solution, you have two options. You can file for bankruptcy Chapter 13 or Chapter 7.
Chapter 13 bankruptcy is also known as the wage earner's plan. It is the way in which someone who has a steady income can work with a professional accountant in order to determine a new repayment plan for the next three to five years. This form of bankruptcy is preferable to that of Chapter 7 because you are still able to retain your possessions such as your house and car as long as you are able to continue to make your payments on these items. The non-exempt debt is restructured and all of your monthly payments go through a trustee at the bankruptcy court who, in turn, distributes the money to your creditors. Your creditors are no longer allowed to harass you once you have filed for bankruptcy.
Not everyone is eligible for bankruptcy Chapter 13. You debts cannot total a certain amount (the limit of which changes frequently) and you need to have a steady income. Talk to your lawyer to find out if Chapter 13 will work best for your situation.
Chapter 7 is known as liquidation or straight bankruptcy. This Chapter applies for both individuals and businesses and should be the last resort. This Chapter entitles the bankruptcy court to seize your assets and sell them immediately. All the money made off the liquidation of your assets goes to paying off your creditors. Just as in Chapter 13, your creditors cannot contact you for the money any longer. All correspondence must go through the court and your lawyers.
In the best case scenario, you do not need to file for bankruptcy at all. If you find that it is your only option, try to file for Chapter 13 if you can!
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