Bankruptcy refers to the process of law wherein a debtor can obtain solutions for his debts under the authorization of the court laws. The solutions may come in different forms that include imposition of a payment program and partial or full discharge of the debts. The payment program will be granted if the debtor has consistent financial means.
Bankruptcy has different types among the common types include the Chapter 7 or Liquidation, Chapter 11, Chapter 13, and Chapter 20. Chapter 7 is also known as the Straight Bankruptcy. In this type of bankruptcy, an appointed trustee will oversee the property whereas some of your assets will be turnover to the trustee. The trustee will sell your assets so you can able to pay your creditors. However, depending on the state laws where you reside, you are allowed to keep some of your personal assets or properties, and posssibley a portion of interest in your home.
In Chapter 7 bankruptcy, most of your debts are cancelled. However, some income restrictions are applied to those who will qualify for this bankruptcy type. If these restrictions are not applied, you are unable to file the bankruptcy especially if you have dismissed or filed a petition in the last 180 days. You are also not allowed to file the bankruptcy if you were denied or granted with Chapter 7 discharge within the past period of six years. In this case, you need to discuss your situation with a bankruptcy lawyer.
The Chapter 11 type of bankruptcy is primarily used by businesses or corporations. Although this type of bankruptcy is available to individuals, its complexity and increased cost makes it unwanted by many people. Most of the petitioners of this bankruptcy type owe debts in excess of the Chapter 13 limits. Under the rule of Chapter 11 bankruptcy, businesses or corporations remain in operations as they are being sheltered from their debts.
Chapter 13 is also called as Wage-Earner Bankruptcy wherein debtors will propose a repayment plan for their debts. If the propose repayment plan is approved by the local court, an appointed trustee will collect the payments and then distribute them to the distributors. The trustee will also supervise your compliance on the repayment plant. However, debtors will have to pay the substantial fees of the trustee.
Debtors who have exceeded the amount limits granted by Chapter 13 bankruptcy, they are barred from applying for such type of bankruptcy. In able to file for Chapter 13 bankruptcy, your debts must be less than certain limits allowed. Just like in Chapter 7, you are unable to file Chapter 13 bankruptcy if you have filed and dismissed a petition in the last 180 days. In this case, you need to get an attorney.
In applying for Chapter 13, you must have a reasonable budget for your proposed repayment plan to avoid any strict enforcement of the bankruptcy laws. In some cases, debtors would end up dropping out of the bankruptcy prior to the completion of their proposed repayment plan.On the constrary, this bankruptcy type is useful especially if the debtor believes that his continue to grow in the future despite the his presen financial crisis. Chapter 13 bankruptcy is not allowed for corporations and partnerships.
Chapter 20 bankruptcy is the process of filing Chapter 7 in able to discharge unsecured debts and succeeded by Chapter 13 filing to allow the debtor to catch up with his mortgage payments.