To fall into a bankruptcy can be a difficult and stressful period. However, do you know that bankruptcy laws are created so as to help those going though that stressful period have a new beginning? People are normally surrounded by financial constrains because of different and unwarranted circumstances including family problems, divorce, loss of income, failed business, loss of job, disability among others. When people experience financial difficulties, they consider bankruptcy. This is an honest solution in their circumstances.
Types of bankruptcy
Basically speaking, there are two kinds of bankruptcy. In liquidation bankruptcy, debtors should surrender their property that is sold, and the proceeds will be distributed to creditors. As a result, all the debts are discharged permanently.
In reorganization bankruptcy, the debtors are permitted to maintain their property. However, they must yield to installment plan so as to repay a part of money owed.
What is Chapter 7 Bankruptcy?
This is by far the most common. They are liquidation bankruptcies whereby the debtors are forced to turn over all their “non-exempt” property to supervising officer called bankruptcy trustee. Property is normally exempt when it fails with particular categories of assets which the debtors are permitted to keep. This includes certain amount of household items, clothing, equipment for work, and in some instances, family home and vehicles.
The trustee is going to seize the non-exempt property of the debtor, if he has any, and sell it. Then the money raised is going to be paid to the creditors of the debtor. This might lead to creditors getting some small fraction of their claims. Balance of debtor’s obligations and loans are forgiven, and will not be collected. Creditors attempting to collect their debts, which have been discharged, face some severe penalties under federal law.
What is Chapter 13 Bankruptcy?
This is a kind of bankruptcy which permits people struggling with debts seek relief through court process. Chapter 13 is normally used by those facing the prospects of home foreclosure. It may stop the process in its tracks.
Several people file for Chapter 13 plan every month with the court throughout U.S, and discover that it can permit them keep their property like homes and cars when dealing with creditors.
When you are considering Chapter 13 to regain control over your finances, you should ask a lawyer if filing it may help you in getting rid of your debt, and stop repossession or foreclosure of your property.
Which type of bankruptcy is the best?
Once you have decided that bankruptcy is the ideal solution for your financial constraints, you’ll need to decide the type which is best for you.
When you’re a small business owner or an individual, the most obvious choice is Chapter 7 “reorganization” bankruptcy, “liquidation” bankruptcy or Chapter 13 “wage earners”.
However, it’s recommended that you consult a Chapter 7 and Chapter 13 attorney so that you may be advised on what steps to take and they type of bankruptcy ideal for your situation.