13th December 2017
Home » Financial » Learning The Secrets About Bankruptcies
December 7th, 2013 Cat: Financial

Bankruptcy: A Brief Overview

Bankruptcy is a process which allows individuals to become free from overwhelming debts when they find themselves unable to repay them. Bankruptcy may be accomplished through either liquidation or reorganization methods.

The Most Common Types of Bankruptcy

Chapter 7 bankruptcy is a commonly chosen type of liquidation bankruptcy. The general principle behind Chapter 7 bankruptcy is that creditors may receive some compensation for the unpaid debt through the seizure and sale, or “liquidation”, of the debtor’s personal or business property. It is important to note that in such a case, there is an option of having some personal or business property become exempt and, therefore, protected against such seizure and sale.

Because the process of Chapter 7 bankruptcy usually only lasts 3-6 months, this can be an appealing option. Chapter 7 bankruptcy is available for both individual consumers and businesses. However, if an individual or organization qualifies for Chapter 13 bankruptcy, they cannot file for Chapter 7 bankruptcy.

The most common type of reorganization bankruptcy is “Chapter 13 bankruptcy.” In the case of Chapter 13 bankruptcy, no personal or business property is seized by creditors (the individual or organization to whom a debt is owed). All or some of the debt is paid monetarily by the debtor through a series of monthly installments, which may be ongoing for up to five years.

If you are considering filing for bankruptcy, it is wise to enlist a legal professional who specializes in bankruptcy. A bankruptcy attorney can help determine which type of bankruptcy is right for you. It is also important to recognize that bankruptcy can aid in the payment and management of many kinds of debt, however this does not include child support, spousal obligations, or tax debts.

Other Options: A Look at Chapter 11 and Chapter 12 Bankruptcy

There are two additional types of reorganization bankruptcy: Chapter 11 and Chapter 12 bankruptcy.

Chapter 11 bankruptcy is most often utilized by businesses which are struggling financially and have accrued debts that exceed the limits for Chapter 13 bankruptcy or who own substantial nonexempt assets. Organizations filing for Chapter 11 bankruptcy must be prepared for an expensive and time-consuming process and expect reorganization within their organization and, as a result, Chapter 11 bankruptcy is infrequently used by most organizations.

Chapter 12 bankruptcy is also infrequently used, primarily because it is targeted to a very small population. In order to even file for Chapter 12 bankruptcy, 80% of the debt must have been accumulated as a direct result of expenses from operating a family farm. Chapter 12 bankruptcy is very similar to Chapter 13 bankruptcy, but has a higher debt ceiling and more protection from liens in order to accommodate the specific needs and adjust for the costs associated with operating a family farm.

Personal Info: Gary Plumley is science-fiction fanatic and authority blogger. He enjoys discussing trends, learning & writing, and taking long walks. Check out this resource for additional tips: https://plus.google.com/101875888930144747414/about?gl=US&hl=en-US You can find more on the author’s profile.

related wallpaper for Learning The Secrets About Bankruptcies