Debt has been accumulating for years. Not only have you spent too much, but you had some unavoidable costs -- medical bills -- and you lost your job. In short, the financial situation spiraled out of control. You know that you need to find some sort of long-term solution, and you're thinking about bankruptcy.
While talking to a friend about it, he or she mentions using "straight bankruptcy." What is this and how does it differ from any other type?
Generally speaking, straight bankruptcy is just a nickname for Chapter 7 bankruptcy. It is also referred to as liquidation bankruptcy.
The process requires you to sell off assets or surrender them to the court -- known as "liquidating" those assets -- and then the money goes toward your debt. You can pay off as much as possible, and then the rest of the debt is discharged.
You do not lose all of your assets. There are exemptions designed to help you keep important items, such as your home and the tools and equipment you need in your line of work. But you do have to get rid of unnecessary assets to make it possible to pay off even a small portion of the debt.
This differs from Chapter 13 bankruptcy, which gives you a repayment plan. With straight bankruptcy, you do not have to make any monthly payments.
If you are thinking that bankruptcy is the only option to help you deal with your debt, it is still important to understand the different types you can use, the benefits they offer and the entire legal process.