With the increase in the cost of living and a loss of jobs due to once-successful businesses having to close, remaining financially stable has become much more difficult for some families. When this occurs, it is not uncommon for some people to file bankruptcy to get relief from their debt. The type of bankruptcy a person files depends mainly on how much and what type of debt they have and if they wish to keep any of the possessions they owe money on. These are three of the most common types of bankruptcies filed in America today.
Chapter 7 Bankruptcy
This type of bankruptcy is also known as liquidation. The person who files can keep his personal belongings, such as clothing and household materials. However, any other property, such as a home, land, or vehicles may be sold to obtain money that is paid towards the debt. This type of bankruptcy is administered by a court-appointed trustee and usually takes four to six months to complete.
In some cases, an individual may be able to keep his home or automobiles if the amount owed against them is not more than the amount the bankruptcy court allows him to claim as exempt. If the person can continue making payments on a home or vehicle, he may also be able to withhold these from being sold to repay back debt. Unsecured debts are discharged in Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows individuals to repay a partial amount of the debt they owe. Arrangements are designed that are more affordable for the person while also allowing him to keep the belongings he is making the payments on. Paying back unsecured debt involves paying only a small portion of the amount owed. This type of bankruptcy lasts from three to five years and the debtor will be free of debt at the end of the repayment plan.
Chapter 11 Bankruptcy
Chapter 11 bankruptcy is also filed by individuals on occasion. This type of bankruptcy involves reorganizing the debtor's payments so they are more affordable. The debtor is then given a certain period of time, usually no more than five years, to repay his debt.
With chapter 11 bankruptcy, the debtor must pay back the full amount of debt. All belongings that are owed against are kept by the debtor as long as he keeps paying the agreed-upon payments. However, if the debt goes into arrears again, these belongings can be repossessed and the creditor may demand full payment of the debt immediately.
Filing bankruptcy can be a lengthy process. Individuals can file on their own, but most people find that hiring a bankruptcy attorney is beneficial. This ensures that the case is filed properly and all the necessary information is provided to the courts.
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