While bankruptcy is never the first choice for people facing financial hardship, it is often the only option that many people have. Bankruptcy carries with it many unknowns and a great deal of fear. For example, Alabama residents may worry about whether or not they will lose their property if they have to file for bankruptcy.
Different types of bankruptcy
To answer the question about losing property in the face of bankruptcy, it is important to note that different types of bankruptcy carry with them different repercussions. The two most common types of bankruptcy that people file are Chapter 7 and Chapter 13. Knowing some of the key differences between those two can answer many of your questions.
Chapter 7 bankruptcy
Chapter 7 bankruptcy is regularly referred to as “liquidation bankruptcy” because it requires that you sell your assets to satisfy outstanding debts. Depending on what state you live in, some assets such as retirement accounts, homes and vehicles are exempt and are not subject to liquidation.
Chapter 13 bankruptcy
Chapter 13 bankruptcy is usually more popular because it does not require that you sell anything to pay off your debts. Instead of liquidation, your debt gets reorganized so that you can repay it over the course of three to five years. However, if you stray from the court-ordered payment plan, your creditors have the legal right to go after your personal assets to satisfy what you owe them.
If you are facing financial hardship and believe that bankruptcy is your only option, you should immediately contact a bankruptcy attorney. Not only might an attorney help negotiate a plan that will benefit you, but he or she may also ensure that your creditors do not come after any assets that they do not have access to.