There are essentially two categories of personal bankruptcy:
Chapter 7 Bankruptcy
Chapter 7 bankruptcy occurs when an individual is unable to repay his or her debts and petitions a federal court for a Chapter 7 discharge. Under Chapter 7, all of your unsecured debt will be discharged, while some of your secured debt can be repaid through the sale of assets. For instance, if you owe money on a Best Buy credit card, that debt is secured, and you may be required to return the television or other appliance you purchased with the card. Although this is uncommon, it is possible. Sometimes the creditor will offer to resolve for pennies on the dollar; if you owe $1,000 on a secured credit card, the merchant will likely offer to settle for $250. Otherwise, this debt is cleared out along with the rest.
Chapter 13 Bankruptcy
Also referred to as the Wage Earners Bankruptcy. Under Chapter 13, the court analyzes all of your monthly income and expenses to determine how much disposable income you have. This sum is applied to the repayment of a portion of your debt. Typically, the court will impose a 3- to 5-year repayment plan. At the conclusion of this period, your entire unpaid balance will be washed out.
What Happens To My Credit Score?
Let's be truthful here. Your credit score will suffer as a result. However, if you are researching bankruptcy options, your credit is likely already ailing. This discharge will remain on your credit report for up to ten years, but you can begin to reestablish your credit within a few months of the completion of the process. Another advantage is that all creditors are prohibited by law from contacting you by phone or mail once the process has begun. In other words, creditors will no longer harass you day and night.""
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