- Personal Finance
Bankruptcy - What are the Different Types of Bankruptcy?
Types of Bankruptcy
If you are seriously considering filing for bankruptcy, its always wise to consult a lawyer beforehand. In many cases, it is required to have a lawyer consulted before filing. It is normal to wonder at the different options out there, should you need to consider bankruptcy. There are standard ways one can go about filing for it. Each one is named after the section of the particular legal code that governs the it. So we see Chapter 7 and Chapter 13 for instance.
Chapter 7 Bankruptcy is also called Straight Bankruptcy. It is advisable to have a lawyer with Chapter 7. Basically, a person is asking to be released of all of their debts after selling off all of their assets to pay off their creditors. Fortunately for many people, one's home is exempt from things having to be sold off, and sometimes other things are protected.
There are still debts that can't be erased even with bankruptcy so make sure to cover all ground and do your research to know before hand. Taxes, for instance still need to be paid, as do fines, alimony and student loans. If these things make up the majority of your debt, then it obviously wouldn't be beneficial to declare bankruptcy and may even hurt things. Filing for Chapter 7, or Straight Bankruptcy cannot be done more often than every seven years. That figure always struck me as odd, as if a person would want to know how often they could file for bankruptcy. I always figured it would be the last possible resort, never a purposeful choice.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy absolutely requires a lawyer, if you are seriously considering filing for it. One of the main characteristics of Chapter 13 is to help people avoid the stigma of that generally goes with the term bankruptcy. Another purpose of this type is that it allows the person to retain their property.
Basically, a court approves a plan in which you pay out creditors over three to five years with your income/wages. It is not absolutely necessary to pay out in full, and the process is supervised by a court appointed trustee. There is some income, like child support, that is not included in the payments.
Below, are a couple of videos that will shed more light on the different types of bankruptcy.
Finally, from what I have observed in others, try to not put off the inevitable in regards to dealing with what seems to be a very hard situation. No one wants to ever have to file for bankruptcy. If you put things off in regards to facing the monetary problems head on, then you will have less options later to consider.
If you are in a position to need to seriously consider filing for bankruptcy, know that you are not alone. These hard economic times are hitting many people across our country, and across the world. Arming yourself with as much knowledge as you can on the topic, and looking equally at all your options will help you in finalizing your decisions.