Four Types of Bankruptcy

There are four types of bankruptcy to know about if you or your business is considering filing. Chapter seven, chapter eleven, chapter twelve, and chapter thirteen bankruptcies have some specific differences, and knowing the specifics of each will help you decide which the best option for you is. If you have exhausted all other possibilities for getting your finances under control, seeing a bankruptcy attorney may be your next first step to financial freedom. Learn the ins and outs of all four options, and be prepared to disclose all of your financial business.

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Chapter seven is the most commonly filed in the United States, and is also commonly known as liquidation. The person filing sells off all non-exempt assets and applies the profit to his/her debt. Though this is available to both individuals and businesses, it is usually avoided by businesses or partnerships because normal business function will be interrupted. For individuals, however, income made after filing does not have to go toward debt, so the individual is free to begin starting over once assets have been sold and applied to existing debts.

The complex chapter eleven bankruptcies is the go to savior for most businesses. Rather than liquidating assets, the business has one-hundred twenty days after filing to submit a debt repayment plan to creditors. The creditors will approve or deny the plan; if the plan is denied, the banks will usually overturn the creditor's ruling. If the person filing does not submit a plan within the designated time, then the creditors can draw up their own plan to which the individual must adhere. Chapter twelve is mostly the same except it is available to farmers only. This allows farmers to continue with their work while simultaneously paying off their debts.

Chapter thirteen is also similar to the aforementioned eleven, but it is accommodates individuals only. Those filing this type are able to keep their assets while they work for three to five years to pay off debt, and because only a certain amount of debt can be claimed, it is possible that some debt will be forgiven.

Though these descriptions and options sound life easy solutions to debt, the decision to file is not to be taken lightly. You should first explore and employ all other methods possible to pay your expenses, and only if all previous efforts have failed, you should seek the advice of a lawyer who specializes in this serious life impacting solution. You may qualify for a free evaluation from an bankruptcy attorney in your area, and you should know that you are not required to follow through as a part of the evaluation.

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