Debt is a major problem for many Arkansas families, as it is for people across the United States. Some people may be reluctant to consider declaring bankruptcy. But the federal government provides this legal avenue in order to give people a chance to regain control of their finances.

There are two types of bankruptcy available to individuals: Chapter 7 bankruptcy and Chapter 13 bankruptcy. People who have no experience with bankruptcy may not know the difference between these two processes.

Chapter 7 bankruptcy gives participants the ability to erase most of their debt, with the exception of student loans, child support and unpaid federal income taxes. Not everyone qualifies for Chapter 7 bankruptcy; there is an income-based means test.

Chapter 13 bankruptcy takes longer to complete, and is more like a payment plan. The court imposes a plan, in which you pay a portion of your debt based on your ability to pay. The participant typically makes payments for up to five years.

One benefit of Chapter 13 bankruptcy is that it puts an automatic stay on debt collection effort for most types of creditors. Many people enter into Chapter 13 to avoid foreclosure on their home, allowing them to keep the house. Their wages may no longer be garnished.

Bankruptcy may seem like a last option. And many families are able to solve their financial problems through debt settlement and other negotiations. But Chapter 7 and Chapter 13 are viable, useful processes for many people. Speaking with a bankruptcy attorney can help make clear which route to take.