There are a couple of different bankruptcy options that consumers can look into when facing excessive debt. The options are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Both can be extremely helpful options for struggling consumers, but there is an important difference between the two choices.

By not choosing the most appropriate bankruptcy option, consumers can find themselves still stuck in a debt rut, which is why it is so important for thorough, honest debt counseling services or legal advice. A recent report presents a worrisome trend regarding bankruptcy and race.

The Wall Street Journal reports on a recent study that looked into bankruptcy filings throughout the country over the past five years. Research shows that more white bankruptcy filers choose to file for Chapter 7 than African American filers.

The study took into account individual circumstances in order to compare filers on equal ground. Research ultimately shows that when a white person and an African American in similar debt situations are faced with bankruptcy options, the African American is more likely to file for Chapter 13.

Chapter 7 bankruptcy is known as the “fresh start” option. It is a way to eliminate all or most of your secured and unsecured consumer debt. Chapter 13 is a debt-restructure option. It is a good option for people who do not meet the government’s Chapter 7 means test, or who do not wish to discharge all of their debts, but it is not meant for all.

Sources report that studies cannot pinpoint the exact reason or reasons behind the filing trend. Researchers suggest that inadequate credit counseling services could be the problem. Also, it’s suggested that some legal professionals steer clients toward Chapter 13 because it’s more profitable.

Financial security is a component of life that significantly affects people’s happiness and health. When facing debt struggles and contemplating bankruptcy, therefore, it’s crucial to do one’s research and work only with credible, trustworthy professionals. Bankruptcy can be the leg up someone needs, but only if it’s approached wisely.

Source

The Wall Street Journal, Bankruptcy Beat (blog): “Studies Find Racial Discrepancy in Chapter 13 Filings,” Eric Morath, 12 May 2011