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People with higher debts than they can afford to repay need to find a way to eliminate these debts. Bankruptcy is just one way they can do this. The two common choices that consumers have for filing for bankruptcy are Chapter 7 and Chapter 13, and they will require that the services of a bankruptcy trustee be used.

Chapter 7 Bankruptcy

Individual consumers and businesses may file for Chapter 7 bankruptcy where their assets will be liquidated in order to repay the money they owe. Very often, an individual’s assets will be exempt from being sold for this purpose. For example, a consumer’s house and furniture and car are often assets that cannot be seized for the purpose of repaying outstanding debts.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy proceeding will require between three and five years. Individuals who file for Chapter 13 bankruptcy will not have to sell their assets to repay the debts; these consumers will set up a payment plan that will need to be completed within the designated time frame.

The Duties of the Bankruptcy Trustee

When people file for Chapter 7 bankruptcy, they will be assigned a bankruptcy trustee who will be in charge of determining which assets are not exempt from being sold. It will be the job of the trustee to sell these assets and pay the creditors.

In a Chapter 13 bankruptcy, the trustee will learn everything he or she can about the consumer’s finances. The trustee in this case will help the consumer determine how much disposable income is available to repay the creditors. The trustee will make sure that the payment plan is something that can be implemented and will meet the consumer’s goals.

One Alternative to Bankruptcy

Sometimes, consumers are seeking a way to avoid filing for bankruptcy. One popular alternative to bankruptcy is debt consolidation.

Debt consolidation allows consumers to consolidate several debts so that they are no longer making several high payments each month that are due on different days. Instead, they will have one monthly payment that will have one, lower interest rate.

Not everyone will be able to obtain a debt consolidation loan because their credit scores are not high enough, or they do not have collateral to offer for the loan. These people may have no other choice but to file for bankruptcy. People often try to avoid this option because they are concerned about having to sell their assets, but it may be the case that all of their assets are exempt and nothing will need to be sold.

James R. Yanch, Trustee in Bankruptcy offering expert services designed to provide the best option to resolve debt crisis.