Florida residents who are facing yet another holiday season wondering not only how they will buy gifts for loved ones but pay basic bills and living expenses are not alone. Even with a relatively strong domestic economy, many people continue to experience serious financial troubles. Bankruptcy may well offer these consumers the best solution to their problems and give them the chance at a truly fresh financial start.

Not all bankruptcy plans are the same, however. As 360 Degrees of Financial Literacy explains, the Chapter 7 plan is most commonly known by consumers. It is often called a liquidation plan because assets may well be sold or seized in order to repay some amount of the debt owed if these assets are held as collateral to the debt. A common example is if a car is repossessed in order to make good on the auto loan as part of the bankruptcy.

A Chapter 13 bankruptcy, as noted by the United States Court, does not entail the loss or seizure of assets. Instead, this type of bankruptcy plan reorganizes and consolidates a consumer’s debt into more manageable levels to be repayed over a period of time. This is often called a wage earner’s plan because the debtor must have sufficient income with which to prove their ability to make the monthly payments to the trustee.

The trustee takes payments and distributes money to the creditors as per an agreed-upon plan. At the end of the bankrupty period, which lasts 36 to 60 months, a discharge is received.