Were you recently laid off at work, leaving you wondering how you are going to be able to pay your bills? Were you recently divorced? Do you have a seemingly endless amount of debt from credit card bills, student loans, or medical expenses? You are not alone, and you do not have to despair.
Many American individuals and businesses file for bankruptcy every year to get a brand new financial start and a second chance at a successful financial life. No matter what your reasons may be for having bills or debts that you are incapable of paying, you may benefit from the filing process. Here are explanations of the most common forms of bankruptcy:
Chapter 7
This is one of the most common ways that individuals and business get a fresh start and a second financial chance. Debtors more or less start over completely, getting a clean slate. The debtor's things are mostly liquidated, meaning most of the person's possessions are sold and put towards the debts owed. However, there are certain exemptions under federal and state law.
The debtor may be able to keep property and personal items such as clothing. Each person filing is assigned a trustee to handle this process. After the person's assets have been liquidated, the trustee handles paying creditors what they are owed, and many of the person's financial obligations are forgiven. Not every debt is forgiven. Child support, alimony, and taxes cannot be forgiven under this Chapter.
Chapter 11
Chapter 11 was originally intended for large corporations, but now individuals can file as well. Unlike Chapter 7, this form of bankruptcy is a financial reorganization plan rather than a liquidation plan. This means that the debtor is still assigned a trustee, but the trustee develops a plan to repay debts in a manageable way. These plans typically last from three to five years, and a judge must agree to the plan. Chapters 11, 12, and 13 allow people filing to keep all of their belongings. Plus, these people normally only pay a percentage of what they actually owe.
Chapter 13
This form of bankruptcy is very similar to Chapter 11. Chapter 13 allows focuses on individuals who do not want to liquidate their belongings to pay back debts. The main difference between these two forms is the type of plan offered to the debtor.
If you are struggling to pay back money that you owe, you have a number of options to choose from. Before you commit to the decision to file for bankruptcy, it may be wise to consult with a legal professional who specializes within this area of the law.
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