Bankruptcy

Bankruptcy is for people who need help for a variety of reasons. Some of the largest corporations in the world and some of the wealthiest people in the world have justifiably relied on the benefits of the federal bankruptcy laws.

Bankruptcy laws are designed to help you reorganize your financial circumstances so that you can afford to live again. That usually means you keep most of what you own and eliminate your debt.

If you file for bankruptcy – chances are you will still keep:

• Your Home
• Your Car
• Your Income
• and more…

 

Types of Bankruptcy

Bankruptcy is a federal legal solution for individuals and businesses that are experiencing financial difficulties and can’t pay their bills. It is a form of debt relief and financial management. There are different kinds of bankruptcy filings, depending on the situation. The most common are:

? Chapter 7 Bankruptcy, a form of personal bankruptcy
? Chapter 11 Bankruptcy, a form of business bankruptcy
? Chapter 13 Bankruptcy, a form of personal bankruptcy

Chapter 7 bankruptcy and Chapter 13 bankruptcy filings are for individuals filing for personal bankruptcy. The difference between the two depends on whether or there is a liquidation of assets or a restructuring of debt and payment schedule. In a Chapter 7 bankruptcy filing, all assets that are not subject to exemption are liquidated with the proceeds used to payoff the debts as much as possible. This is known as a straight bankruptcy in which the debts are discharged and the individual more or less starts over. This kind of filing can only take place once every six years.

A Chapter 13 bankruptcy filing results in more of a reorganization of the debts and financial management than liquidation of assets. It results in a reorganized payment schedule out of future earnings over a longer time period, usually three to five years. The debts are not discharged in this case, they are restructured and paid.

Chapter 13 bankruptcy filings are for businesses. Businesses can also liquidate or reorganize. In liquidation a court appointed trustee takes title to the property and handles the liquidation.

Bankruptcy for Individuals

For individuals, whether they file under Chapter 7 bankruptcy or Chapter 13 bankruptcy, the filing still leaves a bankruptcy record on their credit report for ten years. This may make it more difficult to get car loans or mortgages or other forms of credit during that period. Difficult is not impossible since there are many entities that cater to people in this category.

Even though bankruptcy filings are in a federal court, the laws differ from state to state as to what is and isn’t exempt. For the most part, child support, alimony and student loan obligations are not exempt. Your credit counselor and bankruptcy attorney will have the details for the particulars in your state.