Bankruptcy Basics- Chapter 7 vs Chapter 13

According to the American Bankruptcy Institute, in the year 2010, more than 1.3 million people filed for bankruptcy. The reasons for the bankruptcies varied from loss of employment to salary cuts. With not much hope of a boom in the economy in the near future it is too much to hope for any dramatic changes in these figures in the current year.

For Americans drowning in huge debts, declaring bankruptcy may appear to be the only recourse. But before you do so, you should know some basics about the different kinds of bankruptcy that can be declared.

Chapter 7 Bankruptcy

Also called straight bankruptcy, the Chapter 7 bankruptcy is an option for debtors who have no significant assets to lose. With exception of exempt assets, all others are handed over to a bankruptcy trustee. The trustee liquidates these assets and distributes the proceeds among the various creditors in line with order of precedence. A period of 4 months usually elapses before the bankrupt debtor can claim to be discharged from all his debts.
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