Common types of bankruptcy and how to avoid filing

Erin Gobler is a personal finance expert and journalist based in Madison, Wisconsin. She has a decade of experience writing online and has covered topics such as investing, mortgages, personal loans, insurance, credit cards and more. Robert is a senior editor at Newsweek, specializing in a range of personal finance topics, including credit cards, loans and banking.

Prior to Newsweek, he worked at Bankrate as the lead editor for small business loans and as a credit cards writer and editor. He has also written and edited for CreditCards.

3 most common types of bankruptcies

This legal process allows you to either reduce or eliminate your debt or get onto a payment plan to make it more manageable. But it also comes with added costs, can result in losing some of your assets and can have long-term financial consequences. We spoke with two bankruptcy experts to learn more. We assessed the following five key factors to help you choose the best account for your personal finance needs.

Bankruptcy is a legal process that can either help someone eliminate their debt or get on a more manageable plan to pay it off. While there are several types of bankruptcy that all work a bit differently, the general goal is to help creditors recover some of their money while also providing financial relief for the borrower.

What qualifies you for bankruptcies

Chapter 13 bankruptcy is most helpful for most people since it helps borrowers manage their debts while still allowing them to keep their assets. But it requires having a regular source of income and being able to make the agreed-upon debt payments. Chapter 7 bankruptcy is the fastest and eliminates the most debt, but it also has the most negative consequences.

It requires a borrower to lose many of their assets. Unfortunately, someone living paycheck to paycheck without room in their budget for debt payments may not have an option.