Understanding Chapters of Bankruptcy & which one helps you
Since the year 2005 there has been new establishment of bankruptcy laws. 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 suitable for every debtor and it is important to make sure that you select the right type of bankruptcy when filing, so you can benefit the most.
There are 3 common types of bankruptcy:
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.
Anyone filed under this bankruptcy will find that he can have some properties exempted from selling and everything not exempted is sold to pay debts.
Under this bankruptcy, a person’s debts 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 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.
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 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. Creditors cannot file court charges, send letters to debtors nor to do anything that may harass the debtor.
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 remove your financial problems while at the same time not losing the things you own. 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.
As an advice, one should consider Bankruptcy as the final alternative. It should be seen as a way to assist a person to restart your life again. Most people flock to file Chapter 7 because the debtor can keep some of their possessions. The revised laws have imposed rulings that stops a number of debtors from filing Chapter 7 when they have the ability to repay debts.
