When considering filing for bankruptcy, it’s important to understand the difference between Chapter 7 and Chapter 13, since it will impact what assets your keep. “Chapter 7 is full liquidation. You don’t care about keeping property; you just want to start from scratch,” explained Ash Exantus, director of financial education at BankMobile. “If you own property and want to keep it, or some of it, then you would do Chapter 13, which also gives you a time frame to pay down your debt.” In order to qualify for Chapter 7, you must have little or no disposable income. If you make too much money, you could be required to file for Chapter 13.
One debt scenario not often talked about is parents filing for bankruptcy after taking on too much burden in association with their children. “Parents go into bankruptcy for co-signing loans for children,” said BankMobile’s Ash Exantus. “A parent is looking out for their child and might cosign for a car or a school loan. When the child is not able to pay that debt, the parent is left with the responsibility.”