Bankruptcy should not be our number one option when it comes to debt, as there are many consequences and risks. However, on the other hand, it has the potential to provide a fresh start and a clean slate. There are different kinds of bankruptcy that affect you differently, and knowing how and when to file bankruptcy is an important first step. Do not rush into bankruptcy without taking all the information you can into account. The following list will explain the different types of bankruptcy that are available.
Chapter 7 bankruptcy
This is the most common type of bankruptcy for individuals. Chapter 7 is also known as total bankruptcy. Under Chapter 7, you must surrender any and all assets and property that are non exempt. You’re allowed to keep any exempt property. All of these non-exempt assets will be liquidated in order to pay back your debt. Whatever debt is left from exempt and nonexempt assets will be discharged.
How long does chapter 7 bankruptcy last, though? Well, it’ll stay on your credit for 10 years and the whole process will take roughly six months. Currently the cost of filing a Chapter 7 bankruptcy is $306.
Chapter 13 bankruptcy
If you want to keep some of your assets and are able to pay off at least some of your debt than this might be the auction for you. A chapter 13 will allow you to reorganize your monthly payments so they are more manageable according to your income and will discharge part of the debt in order to make payments more doable
Your payments will either be spread over a longer period of time otherwise you will only be responsible for paying part of the debt back.
The trustee is usually assigned to this type of bankruptcy in order to keep an eye on your finances during the years of your payment plans. It’s up to the trustee and the judge to decide if the creditors are being treated fairly and how much they will receive. Generally speaking, they don’t need the approval of the creditors, but if the creditors do agree, then it will be easier for the trustee and the judge to approve the plan.
Chapter 11 bankruptcy
This type of bankruptcy is reorganizational. It is similar to chapter 13, but there are no limits on the amount of debt. If large businesses are looking to restructure their debt, a Chapter 11 is usually the best option. However, chapter 11 can be confusing and pricey when compared to different types of bankruptcy.
Chapter 11, like chapter 13 means that the debtor can keep assets and still run the business as long as it is under the court supervision. If a debtor is unable to manage their finances, a trustee will be appointed, but it is not automatic.
This type of bankruptcy is fairly flexible, but this generally is what makes it more expensive. While the rules and regulations of the Chapter 11 can be complicated, it can offer a unique opportunity to the business of allowing time to re-position themselves without having to close down their business. Having time to refocus and realign their finances can give a company or a business the fresh start it needs in order to begin to run itself differently in order to avoid falling into the same hole again.
Among the different types of bankruptcy, these are the most common. There are even more different types of bankruptcy, such as chapter 9 and chapter 12, but these are specific to town districts, farmers or fishers.
If you do decide that bankruptcy is the best option for you, do not forego the advice of professionals. A good lawyer will have your best interests in mind and will not lead you astray when it comes to helping you gather your finances and get yourself back on your feet.