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Understanding Chapters of Bankruptcy & Their purposes
By plrprousers | May 14, 2009
In the US law there are a number of new bankruptcy laws being established to cater to the rising ocurrances of bankruptcy cases. These different types offer several options in how the bankruptcy will work, setting up repayment and who can file the type of bankruptcy. Not every type of bankruptcy is applicable 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 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 allows the debts to be wipe clean with little or no repayment.
Under this type of bankruptcy one will see 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. However, this chapter is more skewed to businesses, though.
This type of bankruptcy is best for those with a lot of assets and a lot of debt. This chapter is some sort of a repayment plan so that a business can repay the debts while keeping their properties.
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 assets while repaying their debts and keeping away from common collection methods.
Any type of bankruptcy protect a person or business from 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.
The choice of what type of bankruptcy to file is really based upon each person’s situation. You have to consider your assets and debts. Ultimately one should concerned with the best way to remove 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 a way to get out of debt. It should be seen as a way to help you to 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 stops a number of debtors from filing Chapter 7 because they can afford to repay debts.
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