| Which Type Of Bankruptcy Is Best For You? |
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| Written by Chris A Smith |
| Tuesday, 23 June 2009 13:04 |
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What are the different types of bankruptcy that apply to individuals? There are two, Chapter 7 and Chapter 13. You may have heard of Chapter 11 but that is for businesses not individuals.
What are the different types of bankruptcy that apply to individuals? There are two, Chapter 7 and Chapter 13. You may have heard of Chapter 11 but that is for businesses not individuals. In October 2005 Congress changed the bankruptcy laws making it much more difficult to simply walk away from personal debt. The new law essentially says pay back the debt through a court approved payment plan and you can keep your house and some other property (Chapter 13); or sell everything you own, including your property, to pay what you can to discharge your debts (Chapter 7). Chapter 7 is known as straight bankruptcy, and involves liquidation of all assets that are not exempt. Exempt property may include automobiles, work-related tools, and basic household furnishings. Other property could be sold by a court appointed trustee or given directly to a creditor as payment of your debt. There is also a limitation of how much you can earn during this process. It is not designed for you to profit by not having to pay your debts. Once you have filed for Chapter 7, you will not be able to file again for eight years. Chapter 13 on the other hand, has a waiting period of only two years between filings. Both types of bankruptcy can get rid of unsecured debts and stop foreclosures, repossessions, garnishments and debt collection activities. Both can provide exemptions that allow people to keep certain assets, although exemption amounts will vary by state. Obligations that cannot be satisfied by either form of bankruptcy include child support, alimony, fines, certain taxes and student loan obligations both government and privately funded. Unless you have an acceptable plan to satisfy your debt under Chapter 13, the court usually will not allow you to keep property when the creditor has security lien on it. This could include your home as well as well as boats, vacation homes, recreational vehicles etc. Bankruptcy is no longer the slam dunk procedure that it was. The new law now requires that persons wanting to file either Chapter 7 or 13 attend an approved credit counseling course sometime within the six months before filing. This is another effort to solve the credit crisis without further clogging up the courts with another bankruptcy. In addition, there is now a "means test" for persons wanting to go the liquidation route. If the court believes that you make too much income to just walk away from the debt via liquidation, they will only allow you to file Chapter 13 which is the pay back plan. The decision to file for bankruptcy can be a very emotional one and one that can cause a great deal of friction within a family. Don't make the stress greater by trying to do it yourself. Seek out a qualified bankruptcy attorney to guide you throught the process. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Chris A Smith follows the consumer finance industry and reports on credit card law, credit reporting agencies, consumer bankruptcy, credit rebuilding, alternative banking products and more. To find more information on bankruptcy and alternative plans, go to the informative credit site CreditFix |