Chapters of Bankruptcy & Their purposes
Published by Manny on Tagged Financial Tips
Since the new century there has been new establishment of bankruptcy laws. These different types offer several ways in how the bankruptcy will work for them, how debts will be cleared|settling the debts and instituting who can file what type of bankruptcy. Not every type of bankruptcy is applicable for everyone and it is of utmost importance that you choose the right type of bankruptcy when filing, so you can get the most out of the process.
In essence, there are 3 most common chapters that cover for most debtors:
Chapter 7 bankruptcy can be filed by individuals or businesses. This type of bankruptcy allows the debts to be wipe clean with little or no repayment.
Anyone filed under this bankruptcy will find that he can have some properties exempted from selling 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 suitable for those with assets. 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 run as per normal, 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 properties while repaying their debts and avoiding common collection methods.
Any type of bankruptcy protect a person or business from the harassment of the creditors. 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.
So which is the best chapter for you? The answer is: It depends. You have to consider your assets and debts. In the end, you should be 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.
Bankruptcy should not be considered as an avenue to get out of debt. It is intended to be a way to assist you restart your life again. Do not think that you can get away with Chapter 7 because debts are completely eliminated. The revised laws have imposed restrictions that prevents many people from filing Chapter 7 because they have the ability to pay debts.
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