Bankruptcy laws in the US are set by the federal government and administered in the Bankruptcy law courts. The purpose of the laws is to reach an equitable agreement between the person filing for bankruptcy and those that are owed money. The laws try to get as much of the money that is owed to the creditor without making it impossible for the debtor. It is thought that nearly one million people will go bankrupt this year in the United States. They will consider filing for bankruptcy. This article will cover the ways they can go if they decide to file for personal bankruptcy.

Filing under Ch7

Filing chapter 7 personal bankruptcy is the most common form of personal bankruptcy. Essentially it is a court arranged way to liquidate your assets and use this money to service your debts. The process involves drawing up a list of personal assets that a court appointed trustee will sell off. The court will then distribute the money from this process to all the creditors. Chapter 7 bankruptcy costs approximately $300 for a filing fee. It can be filed once every 7 years by the individual.

Filing Chapter 13

Chapter 13 differs from chapter 7 in that it does not aim to clear a person from their debts but merely to set up a structure so that they can pay off the debts free from being harassed by creditors. The courts will help the debtor and creditors reach an agreement about how the debtor will pay off his/her debts. This will be some form of payment plan that will last for so many years and be a sum of money each month. The debtor will give this money to a court appointed trustee who will then give the money to the creditors. In this way the debtor will not have to liquidate their assets but work towards paying off the debts over a period of time.

Although both these types of personal bankruptcy will eventually clear your debts there are some things to consider before filing for one or the other. Chapter 7 will be a quick way of removing this debt but it will also give you a bad credit history and make it harder to recover from bankruptcy. Some personal assets that may be exempt from liquidation, like your home and car need to meet a specific criteria before they are eligible. You must owe 80% of the mortgage on the home. The car must be valued at less than $2000. In chapter 13, it will take longer to remove the debt but you will not lose any assets. However, the debt you will be paying off has to match the following criteria. You can't have a unsecured debt in excess of two hundred fifty thousand dollars. You can't have a secured debt that is more than seven hundred and fifty thousand dollars.

The bottom line is that you know the rules and regulations of the various chapters well before ever filing for one or the other. It may be an idea to employ a lawyer versed in the bankruptcy laws who can advise you on the best option for your particular case.