Different Types Of Bankruptcy
In the US law there are a number of new bankruptcy laws being established to cater to the increasing need of bankruptcy cases. The new laws allow the debtors and creditors more flexibility in filing bankruptcy orders, setting up repayment and instituting who can file what type of bankruptcy. As the new laws are more diversified, not every type of bankruptcy is applicable for every situation and it is crucial that you choose the right type of bankruptcy when filing, so you can benefit the most out of the process.
In essence, there are 3 main chapters that covers for most people:
Chapter 7 bankruptcy is the most common process as it can be filed by individuals or businesses. This type of bankruptcy allows the debts to be wipe clean with little or no repayment.
Under this type of bankruptcy a person takes their exemptions and everything not exempt is sold to pay debts. That is the only payment on debts made.
Once the bankruptcy is approved the persons debts filed under the bankruptcy are cleared.
Chapter 11 bankruptcy can be filed by businesses and individuals. It is usually reserved for businesses, though.
This type of bankruptcy is best for those with a lot of assets and a lot of debt. It is a repayment plan that allows a person or business to repay debts in a way they can afford while also keeping all their assets.
Under this chapter, businesses can still remain operational, which is a very good option for many.
Chapter 13 is another repayment plan for individuals only. Under this chapter a person get to keep their assets while repaying their debts and avoiding common collection methods.
Any type of bankruptcy protects a person or business from collection processes. The creditors cannot proceed with the collection process once this is filed. They can not file court charges or claims. They can not continue to send letters or call a debtor. They can not do anything outside of the bankruptcy proceedings.
The choice of what type of bankruptcy to file is really based upon your own situation. Always look at your assets and debts carefully before you decide. In the end, you should be look at clearing your debts without losing all your current assets. In order to best do this you need to look at what property you own that is exempt and if you have any property that is not exempt.
Bankruptcy should not be considered as a way to get out of debt. Do not think that you can get away with Chapter 7 because debts are completely eliminated. New laws have prevented many people from filing Chapter 7 because they can afford to repay debts.
Filed under: Bankruptcy
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