Debt relief can be varied
There are many types of bankruptcies, but most people use just two of them.
The first, Chapter 7, is often called a straight bankruptcy. This type of bankruptcy discharges most debts.
You can apply if you earn less than the median income for New Hampshire or if you earn more but pass a financial means test. To pass that test, you must earn less than $100 a month after a complex formula that deducts expenses including food and housing expenses. When someone files for Chapter 7, and are accepted by the court, most of his or her unsecured debts are absolved.
Chapter 13, or wage earner’s bankruptcy, don’t absolve a filer’s debt. Instead, it involves proposing a three- or five-year payment plan based on your income. A major advantage, though, is that you keep your assets while making the payments, according to the association.
Chapter 13 bankruptcies are designed to give people a chance to catch up on debt rather than eliminate it, according to the association.
– Source: American Bar Association