Understanding The Various Types Of Bankruptcies

By Charlie —

Financial problems can arise at any given point of time. There are varied factors that can lead to a severe financial crisis leaving you in a lurch. Repaying bills and outstanding debts becomes more than just a herculean task and it can end up taking a toll on your life. Besides, certain events can completely challenge your ability to repay these debts. The loss of a job is one of the most common reasons and thus, unemployment can most certainly wreak havoc. To add on to this mess, if you or your loved one meets with an accident or you are simply unable to meet the minimum requirements for repaying student loans or medical bills, you need not lose faith. While you are in a terribly messy situation, there is always a way out. If you wish to start afresh and on a new slate, you must certainly consider filing for bankruptcy. While this can harm your credit score to a an immeasurable extent, it may be the only viable solution left that can help you get back on your feet within a few years. However, you must take note that there are a few types of bankruptcy that you must be aware of and select the one that appeals most to your situation. If debt settlement is still something that you can take care of, you must consult with your attorney who will guide you as to how to negotiate credit card settlement.

1.)   Bankruptcy Chapter 7

To put it simply, this can be considered as one of the most common ways to file for bankruptcy. It is bankruptcy in its most natural form. Here, the debtor loses all of his possessions and they are liquidated. This is then used to pay off the debts owed. Although it may not be sufficient enough to pay off the entire debt amount, it helps make up for at least a minimum debt amount. However, you should note that personal items cannot be included for liquidation. Besides, this type of bankruptcy gives the debtor an opportunity to begin his financial journey with a clean slate and this is an excellent way to build up your finances by being more aware of your mistakes and not repeating then the second time around.

These activities usually take place with the help of a trustee and all the financial work of liquidation and payment to the creditor is carried out by the trustee.

2.)   Bankruptcy Chapter 11

Although there are several sizeable corporations that usually file for this type of bankruptcy, there are also certain individuals who can opt for this if the need arises. However, as opposed to Chapter 7 bankruptcy wherein liquidation of assets takes place, this type of bankruptcy essentially helps the debtors come up with an effective and full-proof repayment plan for the debts owed to the creditors. As in chapter 7, the chapter 11 bankruptcy also calls for a trustee to work with the debtor. The only difference here is the fact that the trustee in fact helps the debtor come up with a plan that will help pay off the loans over a period of years ranging from three to five. However, the final decision pertaining to the repayment plan rests with the judge. It is important for a person to know how to negotiate credit card settlement for quick results.

3.)   Bankruptcy Chapter 13

This type of bankruptcy is eerily similar to chapter 11 except that in chapter 13, the rules for devising the repayment plan are different from those specified in chapter 11.