Different Chapters of Bankruptcy & which one helps you
Under the laws of bankruptcy they have established different types of bankruptcy. The new laws enable the debtors and creditors more flexibility in filing bankruptcy orders, settling the debts and who can file the type of bankruptcy. Not every type of bankruptcy is suitable for every situation and it is of utmost importance that you select the right type of bankruptcy when filing, so you can benefit the most.
I will show the 3 common chapters:
Chapter 7 bankruptcy is the most common process as it can be filed by individuals or businesses. This type of bankruptcy allows the debts to be wipe clean with little or no repayment.
Anyone filed under this bankruptcy will find that he can have some possessions exempted from selling and everything not exempted is sold to pay debts.
Once the bankruptcy is approved the persons debts filed under the bankruptcy are cleared.
Chapter 11 bankruptcy can be filed by businesses and individuals. It is usually reserved for businesses, though.
This type of bankruptcy is suitable for those with a lot of assets and a lot of debt. This chapter is some sort of a repayment plan so that a business can repay the debts while keeping their properties.
Under this chapter, businesses can still remain functional, which is a very good option for many.
Chapter 13 is another repayment plan for individuals only. It allows a person to keep their properties while repaying their debts and keeping away from common collection methods.
The bankruptcy laws protect a person or business from the harassment of the creditors. Once bankruptcy is filed creditors must stop all collection processes. Creditors cannot file court charges, send letters to debtors nor to do anything that may harass the debtor.
So which is the best chapter for you? The answer is: It depends. You have to consider your assets and debts. Ultimately one should look at clearing your debts without losing all your current assets. In order to best do this you need to look at what property you own that is exempt and if you have any property that is not exempt.
Bankruptcy should not be seen as a way to escape from debt. It is intended to be a way to enable you restart your life again. It is wrong to just decide on Chapter 7 because debts are completely eliminated. New laws have prevented a number of debtors from filing Chapter 7 because they can afford to repay debts.