People in Sacramento, California, have varying levels of debt. After certain events in life, the debt can become overwhelming for some. People may have a major illness or injury that prevents them from working in addition to incurring potentially major medical bills for the treatment they received to treat the illness or injury. People in this situation may start to look into their options for trying to rid themselves of the debt and for some, bankruptcy may be a good option.
As people look into whether bankruptcy is a good option, they will soon learn that there are different types of bankruptcy. For most individuals, Chapter 7 bankruptcy and Chapter 13 bankruptcy are the two most common choices.
Chapter 7 bankruptcy basics
Chapter 7 bankruptcy allows people to discharge most of their unsecured debt, which includes medical bills, credit cards and other loans. However, in order to receive the discharge, they must liquidate their assets. This means for many that they may need to sell vehicles and other personal property. Also, their home may go into foreclosure, which means they may lose their home as well.
Chapter 13 bankruptcy basics
Chapter 13 bankruptcy does not immediately discharge unsecured debts, but instead creates a repayment plan. The person’s debt is consolidated and then is overseen by a trustee who will distribute payments to the various creditors. While this requires the debtor to continue making monthly payments, it does have the advantage of allowing people to keep their property. It will also stop foreclosure proceedings and allow people the opportunity to keep their home.
People in California have different circumstances and for some, Chapter 7 may be their only option. However, others may have a job and may currently be earning an income that will allow them to continue to make monthly payments. For people in this situation, Chapter 13 could be a better option so they can keep their property through the process. Knowing the differences between the two options is important and consulting with experienced attorneys could be beneficial.