Thomas F. Miles, Attorney and Counselor at Law
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Choosing between types of personal bankruptcy

For many California residents, financial difficulties rise slowly over time, leaving an individual unaware of just how dire the situation has become until one or more events act as a catalyst for change. From that point forward, the decision becomes not whether or not to seek bankruptcy protection, but turns to which type of personal bankruptcy should be sought. The answer depends in large part on the assets owned and the level of income available to continue making payment in existing debts.

For example, an individual who has a high level of consumer debt but does not own a home may be better off seeking Chapter 7 bankruptcy. This path often leads to the elimination of many types of unsecured debt. Once the process is complete, the filer can move forward with a fresh financial start, and rebuild financial security for the coming years.

For an individual who owns a home and wants to retain that property, Chapter 13 may offer a better solution. In this form of bankruptcy, individuals who are able to continue making their mortgage payments can restructure their existing debt to make repayment more affordable. Some types of debt are eligible for discharge through Chapter 13, but the primary focus is on restructuring, not the elimination of debt.

Each and every individual will have a unique set of financial needs when it comes to filing for personal bankruptcy. Fortunately, there are different types of bankruptcy available to suit these needs. The first step, beyond making the decision to file, is to determine which form of bankruptcy offers the best fit. From that point forward, the process involves completing a number of steps toward a new financial outlook for California residents.

Source: Investopedia, "File Chapter 7 Bankruptcy", Daniel Kurt, Oct. 1, 2014

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