Different Chapters of Bankruptcy & how they work

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 avenues in how the bankruptcy will work for them, settling the debts and who can file the type of bankruptcy. Not every type of bankruptcy is suitable for everyone and it is of utmost importance that you find the right type of bankruptcy when filing, so you can get the most.

Here are the 3 most common types of bankruptcy:

Chapter 7 Bankruptcy

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.

Anyone filed under this bankruptcy will find that some of the debtor’s possessions can be exempted 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

Chapter 11 bankruptcy is similar to Chapter 7 as it can be filed by both business and individuals. However, this chapter is more skewed to 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 operational.

Chapter 13 Bankruptcy

Chapter 13 is another repayment plan for individuals only. It allows a person to keep their assets while repaying their debts and keeping away from common collection methods.

The bankruptcy laws protect a person or business from collection processes. 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 option? The answer is: It depends. Always look at your assets and debts carefully before you decide. Ultimately one should concerned with the best way to get rid of 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.

Bankruptcy should not be seen as an avenue to escape from debt. It is intended to be a way to enable you restart your life again. Do not think that you can get away with Chapter 7 because debts are completely eliminated. New laws have prevented many debtors from filing Chapter 7 when they can afford to pay debts.