Different Chapters of Bankruptcy & how they work
In the US law there are a number of new bankruptcy laws being established to keep in check the increasing ocurrances of bankruptcy cases. These different types offer several avenues in how the bankruptcy will work for them, setting up repayment and instituting who can file what type of bankruptcy. As the new laws are more comprehensive, not every type of bankruptcy is suitable for every debtor and it is crucial that you find the right type of bankruptcy when filing, so you can get the most.
In essence, there are 3 most common chapters that cover for most debtors:
Chapter 7 bankruptcy is the most common process as it can be filed by individuals or businesses. This type of bankruptcy wipes the debts clean with little or no repayment.
Under this type of bankruptcy one will see that some of the debtor’s properties can be exempted and everything not exempted is sold to repay debts.
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 assets. This chapter is some sort of a repayment plan so that a business can repay the debts while keeping their properties.
Usually this is filed by a business because during the bankruptcy process the business can still run their business.
Chapter 13 is another repayment plan for individuals only. It allows a person to keep their possessions while repaying their debts and avoiding common collection methods.
Any type of bankruptcy protect a person or business from collection processes. Once bankruptcy is filed creditors must stop all collection processes. Creditors cannot file court charges, send letters to debtors nor to do anything that may harass the debtor.
The choice of what type of bankruptcy to file is really based upon each person’s financial status. Always look at your assets and debts carefully before you decide. In the end, one should concerned with the best way to get rid of your financial problems while at the same time not losing too much of your possesions. 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.
In conclusion, you should think of Bankruptcy as the final resort. It should be seen as a way to help you to get back on track. It is wrong to just decide on Chapter 7 because the debtor can keep some of their possessions. New laws have prevented many people from filing Chapter 7 because they can afford to repay debts.
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Tags: bankruptcy
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