Different Types Of Bankruptcy
Under the laws of bankruptcy there have been established different types of bankruptcy. These different types offer several options in how the bankruptcy will work, how debts will be cleared and instituting who can file what type of bankruptcy. As the new laws are more diversified, not every type of bankruptcy is ideal for every situation and it is important to make sure that you choose the right type of bankruptcy when filing, so you can benefit the most out of the process.
There are 3 most 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.
Under this type of bankruptcy a person takes their exemptions and everything not exempt is sold to pay debts. That is the only payment on debts made.
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 best 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.
Usually this is filed by a business because during the bankruptcy process the business can still remain open and operational.
Chapter 13 is another repayment plan for individuals only. It allows a person to keep their assets while repaying their debts and avoiding common collection methods.
Any type of bankruptcy protects a person or business from collection processes. Once bankruptcy is filed creditors must stop all collection processes. 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.
The choice of what type of bankruptcy to file is really based upon your own situation. You have to consider your assets and debts. Ultimately you should be look at clearing your debts without losing all your current assets. 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. Do not think that you can get away with Chapter 7 because debts are completely eliminated. New laws have prevented many people from filing Chapter 7 because they can afford to repay debts.
