When does it make sense to declare bankruptcy is a question that many homeowners ask when they are overwhelmed by the amount of debt they have incurred. Usually, the second question that follows is, what type should I declare and what liabilities will be covered?
This is a personal question and must be thoroughly thought out by the person asking it. Seeking the advice of an attorney and discussing the homeowner's goals would help the homeowner to make the decision that is right for them.
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Again, planning is essential. For example, making a list of creditors and debtors before your meeting with the attorney you have selected will help to decide the plan and the type that will best suit your needs and goals as a homeowner.
My experience with these questions is a practical one. But from my experience, here is a brief explanation and overview of the three types and how they can help a homeowner with overwhelming debt:
Chapter 7: also known as a straight bankruptcy - rids all debts and individual property.
Chapter 11: debtor (if business) continues to operate his business free of claims and judgments. Usually, this type covers liabilities/assets over 1M.
Chapter 13: the most common type filed by an individual and his major goal is to have a payment plan implemented. Real property can be included.
In summing up the above,
1) it is important to seek the advice of a legal professional.
2) Be prepared to keep- a list of all current debtors and creditors.
3) If declaring a Chapter 13 be prepared to work out a payment plan,keep it current and you will be successful in paying down your debt.
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