Bankruptcy is a process wherein individuals, small businesses, and corporations are saved from their debts. Through a process of reorganization and restructuring, a certain portion of the debt is discharged and the rest is repaid at a lower rate.
Though most debts in bankruptcy can be discharged, certain debts are not dischargeable like taxes, penalties, child support, fines, student loans, and alimony payments. Discharging a debt helps the debtor to be protected from the harassment of the creditors. If a particular debt by a secured creditor is secured by a particular loan, they can enforce a lien to recover that property.
2) Types in Bankruptcy
The different types of bankruptcies are named for the chapters of the US bankruptcy code where they are defined. The most common forms include chapter 7 and chapter 13 which are filed typically by individuals or couples. Chapter 11 bankruptcy is usually filed by businesses.
3) Chapter 7
It is also referred to as liquidation of assets because most of the debtor’s properties are sold off to pay back the creditors. Chapter 7 bankruptcy is mostly helpful to low-income debtors who have few Assets and discharge debts within 3 to 5 months. It is designed to relieve a debtor of unsecured debts including credit card bills and medical bills.
4) Chapter 13
In chapter 13, a debtor with a regular income who can repay some amount of the debt through a structured repayment plan reorganizes their debts and repays the creditors within a period of 3 to 5 years. The debtors are allowed to keep all of their assets as long as they make the structured payments.
5) Chapter 11
Chapter 11 is similar to chapter 13 in a way that it also allows the reorganization of debts. It is available to individuals, corporations, and partnerships. In Chapter 11, the amount of debt that can be discharged is not Limited unlike in chapter 13. Chapter 11 is mostly used by debtors whose debt levels are too high, whose assets are extraordinarily high, or whose finances are too complicated.
There are other bankruptcy chapters. To know the correct chapter for you to apply it is advisable to consult a bankruptcy attorney before you file the petition. An attorney will be able to guide you on the rights and wrongs. You can also contact Recovery Law Group from Los Angeles & Dallas, TX for the same. Contact – (888-297-6203).