If you are at a point where you are no longer able to pay your creditors each month and need some financial help, you might be thinking about filling for bankruptcy. There are a lot of half-truths and myths surrounding this financial process. Some people think that bankruptcy means the end of the road for them financially. While there are usually less than ideal circumstances that lead up to the typical bankruptcy, the process itself is actually more about a new start than the end of the road. Bankruptcy laws in Chandler, AZ exist to help people make it through difficult financial times. If you are considering bankruptcy it’s a good idea to understand some of the basics about this financial process.

Different Types of Bankruptcies

You hear about different “chapters” of bankruptcy. Many people aren’t sure what the differences are. The three most common types of bankruptcies that you hear about are:

• Chapter 11 Bankruptcy
• Chapter 7 Bankruptcy
• Chapter 13 Bankruptcy

While these aren’t the only types of bankruptcy, they are the most commonly known and used. What are the differences between these three common bankruptcies?

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is reserved for use by commercial entities or businesses. If you own your own business, you may be eligible for using Chapter 11. For most Americans, who don’t own a business, Chapter 11 will never be an option. You will commonly hear about this type of bankruptcy in the news, but you will never file it for yourself.

Chapter 7 Bankruptcy

This type of bankruptcy is sometimes called a “liquidation” or total bankruptcy. In chapter 7 bankruptcy, all personal and unsecured debt is eliminated. The person’s personal property, like cars and other property can be sold off, or liquidated to pay off as many creditors as possible. This is a drastic step for many people, and not everyone should attempt to file for Chapter 7.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy offers people the chance to reduce their consumer debts and pay all creditors back according to a court-approved, structured payment plan. All consumer debt is bundled up and people can pay these debts back, over time, in a way that is easier than most other repayment plans. Some debt can be eliminated or significantly reduced, but all debt is handled without having to liquidate personal properties

Speak with a financial professional to see which type of bankruptcy you should consider. The bankruptcy laws are there to protect you from creditors while you are in the process of rebuilding your financial foundation. Working through a bankruptcy can seem like a challenge, but once you have done it, you can breathe a little easier, knowing you are protected and being offered a second chance.