There are many goals that bankruptcy can accomplish, including clearing debt, but there are many other factors as to what you can qualify for as a business or an individual. There are six different types of bankruptcies.
Whether you are a business or corporation, an individual, a family farmer, or an international debtor, there are myriad options and types of bankruptcy to help resolve the debts in an efficient and usually very beneficial manner.
Chapter 7 (liquidation bankruptcy) is the one of the most common types of bankruptcy for individuals (not businesses).
Depending on the state that you are living in, there are various things you will not be forced to sell to complete this bankruptcy, but largely the liquidation of all of your assets and anything you own, of value, will be used by a court-appointed trustee to oversee the sale to be used to pay off your creditors.
Remaining debt that is unsecured, like credit cards and medical bills are typically erased, though unpaid taxes and student loans do not count towards this and are not erased.
• In order to qualify to file for Chapter 7 Bankruptcy, the court must decide that you do not make enough money to be able to pay back your debt based in part on your income versus the state average
• There are no guarantees as to how the bankruptcy will end up, but many people are able to keep necessities, such as their home, their car, and their retirement accounts
• It does not stop a foreclosure of a property, though it can postpone it
• If you have things of value you want to keep but still owe money on is to work out an agreement to reaffirm the debt whereby a loan agreement is reached and you, the debtor, continue to make payments, or resume making them
• When you file, a meeting of your creditors that you owe money to is required for you to attend, and the creditors can proceed to ask prying questions into your financial state
• Chapter 7 bankruptcies will go on your credit report and stay on there for 10 years
• You cannot file a second Chapter 7 until after eight years have passed
Chapter 11 Bankruptcy is typically used to reorganize a business or corporation in order for the business to continue running and operating while paying off their debt in a plan agreed upon by both the court and the creditors.
In some cases, certain individuals, like real estate investors for example, may also choose to file under Chapter 11 Bankruptcy when they have too much debt to qualify for a Chapter 13 bankruptcy, and they also have high-value assets and property. Some athletes, celebrities, and wealthy entrepreneurs will occasionally file for this reason.
Chapter 13 bankruptcy reorganizes your debt rather than having it forgiven as it often does in a Chapter 7.
For those who do not qualify for a Chapter 7, or who would rather the other benefits: stopping a foreclosure by allowing you the time to bring your mortgage current; by allowing the debtor to keep their assets and catch up on any debt that is not bankrupt-able.
The Chapter 13 process requires the court to approve a monthly payment plan for you, so as the debtor you pay back a portion of your unsecured debt and your secured debt over in three to five years.
The determined monthly payment amount depends on your income and your amount of debt, and the court puts you on a strict budget to check on your spending and the fulfillment of the debt being paid back.
You are required to be current on your taxes, and the Chapter 13 Bankruptcy will remain on your credit report for seven years, though you can file for another after two years time.
