Affordable bankruptcy. Unfortunately, there is no type of bankruptcy out there that is “affordable”. Fact is, declaring bankruptcy has severe consequences. Despite this, there are different versions of bankruptcy, one of which is easier to swallow. Although there are many Chapters of Bankruptcy available, Chapter 7 and 13 are the most common. Other types of bankruptcies only apply to very specific situations. Chapter 12, for example, applies to family farmers and family fishermen.

Chapter 7 Bankruptcy: Known as the bankruptcy because, if you apply for it, although your debts are forgiven (except for debts for things such as fines), most of your assets are sold off and the money collected from their sale is given off to your creditors. Furthermore, Chapter 7 bankruptcy can stay on your credit report for up to 10 years, making it very hard for you to obtain a loan or with decent interest rates.

Chapter 13 Bankruptcy: Rather than your debts being completely forgiven, as in Chapter 7, you must pay your debts under a court-approved plan. Essentially, Chapter 13 is a consolidation plan, which makes it easier for you to pay your creditors within a time span of about three to five years. The plan is developed with the help of a counseling agency and is usually called a Debt Repayment Plan. You pay money to the trustee and the trustee gives that money to your creditors. The main drawback with Chapter 13 is that your credit report will be stained for approximately 10 years. Regardless, if you follow the plan that came out of Chapter 13 Bankruptcy, your debts will slowly decrease and your ability to get a decent loan will improve over time. Who is eligible for this type of affordable bankruptcy? As long as your unsecured debts (debts that are not connected to any collateral, such as your house) are less than $336,900 and your secured debts (debts that are tied to collateral) are less than $1,010,650, you should be eligible.

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