Are you drowning in debt and unable to pay your creditors? Maybe you lost your job, lost a relative, are dealing with a medical emergency, or recently got divorced.
Whatever the reason, it has become extremely difficult for you to keep up with your bills and you have run out of solutions and options.
Before you consider filing bankruptcy it’s important that you understand the various types of bankruptcy and what they entail.
What Is Bankruptcy?
Bankruptcy is a way for people to eliminate debt they are unable to pay by either establishing a repayment plan or liquidating assets. All cases are handled in bankruptcy court for which debtors are required to pay fees.
It’s important to know that there are 19 types of debts that do not qualify for discharge. However, debts that do qualify for discharge are no longer the responsibility of the debtor. Additionally, creditors must stop attempting to collect the debt.
Although declaring bankruptcy is a way to start over, there are long-term consequences on your credit. Because bankruptcies appear on your credit for 7-10 years, creditors are less likely to approve you for loans or credit cards.
6 Types of Bankruptcy
Individuals, businesses, cities, school districts, and so on can choose from 6 different bankruptcies to file. Deciding which one to file depends on the type of debt and the financial situation.
Ultimately, the court and sometimes the creditor create a plan for the debtor.
1. Chapter 7: Liquidation
This is the most common bankruptcy for individuals and requires liquidation. Basically, if your income is too low to pay your debt, the court will require you to sell anything with value to pay your creditors back.
Depending on what state you live in, you may have to sell your house, vehicle, and even retirement accounts.
2. Chapter 13: Repayment Plan
This type of bankruptcy is for individuals and small business owners. The court decides on a monthly repayment plan and you pay your debt within 3-5 years. However, there is a secured and unsecured debt threshold to qualify.
Chapter 13 also gives you the option to stop a foreclosure. For more information or help filing, consult a Chapter 13 Bankruptcy Attorney.
3. Chapter 11: Reorganization
This kind of bankruptcy helps businesses and corporations repay their debt by establishing a plan. It also includes a plan on how they will reorganize and manage the business. Everything is approved by the court and creditor.
4. Chapter 12: Family Farmers
Chapter 12 is similar to Chapter 13 but offers more flexibility for fishermen and family farmers to repay debt under a plan.
5. Chapter 15: Foreign Cases
Chapter 15 allows certain debtors outside of the U.S. to file bankruptcy in the U.S.
6. Chapter 9: Municipalities
This type of proceeding helps municipalities such as cities, school districts, counties, etc. to create a repayment plan to pay off their debt.
Are you ready to file and take care of your debt? Check out this resource for bankruptcy forms, local offices, and contact information.
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