Bankruptcy offers people a route to have their debts canceled out because they are insolvent. If you are considering declaring bankruptcy, you will want to know the right kind of bankruptcy to declare.
Below are the three chapters of bankruptcy you should consider. Also, get in here for the best bankruptcy lawyer near Bristol, TN.
Chapter 7 Bankruptcy
This type of bankruptcy offers liquidation. What this means is that a debtor must hand over all their assets to someone called a trustee. The trustee will sell these assets and pay off the debts that can be settled from what is realized.
However, there are a lot of scenarios in which the debtor has no assets. Such a case is determined as a “No Asset” case. In fact, No Assets cases make up the larger percentage of those who file for Chapter & Bankruptcy.
In such a case, there is no loss of assets. Rather, most of the debtor’s debts are canceled or discharged.
In order to access this Chapter, the debtor must have little to zero disposable income.
Chapter 11 Bankruptcy
This chapter of bankruptcy is expensive and is used mostly by businesses. In fact, it is often known as “reorganization bankruptcy”. In simpler terms, it allows a person or business to take a break from paying debts while they get their business together.
Chapter 11 bankruptcy is quite complicated. When a business files Chapter 11, it may continue to operate. The debtor in possession continues to run the business normally. However, in a lot of cases that contain dishonesty, incompetence, or fraudulent practices, a trustee is appointed by the court and runs the company through its bankruptcy.
Chapter 13 Bankruptcy
This chapter of bankruptcy caters to those who can actually pay a part of their debt. It is meant to offer a sort of relief. This relief comes in form of debt adjustment. What this means is that the debtor will be given a repayment schedule or plan for his debt.
One thing to note is that as a debtor, you are only required to pay an unsecured creditor what you can afford. The minimum payment, however, should be equal to what the creditors would have received if the debtor filed for chapter 11 bankruptcy.
Chapter 13 bankruptcy also caters to homeowners. This will prevent a debtor’s home from being taken away from them. With this, they can pay what was owed on a mortgage over the plan’s duration.
This chapter usually allows as much as 60 months which is huge compared to the 4-6 months which mortgage companies will offer.
Tax debtors can also make use of Chapter 13. This chapter will allow a debtor to pay what they owe over a period of five years. These will come in form of monthly payments that the debtor must keep up with.
There are several alternatives to filing for bankruptcy. Before you begin the process, it is important to contact a professional such as a financial planner or lawyer to help you out with the process. This might even save you from having to filing for bankruptcy at all.