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Can you pick the type of bankruptcy you use?

You know there are various types of bankruptcy that can be utilized when debt gets to be too much, labeled as "Chapters", such as Chapter 7, Chapter 13, and Chapter 11. Can you simply pick which one you want to use?

Maybe. The first thing to note is that most personal bankruptcy filings are going to be either Chapter 13 or Chapter 7. Others are aimed at businesses, those working in specialized professions, and the like.

Even if you target both Chapter 13 and Chapter 7, you may not be given a choice as to which one you use. They both have different goals and eligibility requirements. The only way you can pick the one that you want to use is if you actually qualify for them both. If you just qualify for one, it's the only option open to you.

Much of it is dictated by your income. Chapter 13, for instance, creates a new repayment plan to spread your debt out over three to five years. You're then told to make monthly payments. Some debt may be discharged, but most is not. Chapter 7 liquidates your assets and discharges most of your debt.

So, if you have a good income and can afford Chapter 13 payments, you could qualify, but those without an income will not. Likewise, it is possible to make too much to use Chapter 7, and you'll be told you can only use Chapter 13 and eventually pay back most of what you owe.

There are many bankruptcy options, but that doesn't mean you can always just pick the one you like most. It's important to know how to qualify and which options are there for you, as every case is different.

Source: FIndLaw, "Bankruptcy: Frequently Asked Questions," accessed March 31, 2017

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