Chapter 11 bankruptcy protection
Who can file for bankruptcy protection
Any individual or business can file. Once filed, the individual or business is referred to as a "Debtor". You cannot file if you have had a bankruptcy discharge within the last six years; nor can you file if a prior filing was discharged for cause within the last 180 days. What are the different kinds of bankruptcy for individuals or for small businesses and what are the differences
The two basic kinds are Chapter 7 or Chapter 13.
Chapter 7 is available to both individuals and to businesses. This is a total liquidation, under the supervision of a Bankruptcy Trustee, of all of your assets that are not protected by certain "exemptions", such as a certain amount of equity in your home or your car.Any money received by the trustee is paid out, pro rata to the various creditors and the Debtor is then freed from his or her debts.
Chapter 13 is available only to individuals whose debts do not exceed a certain amount. It allows for a plan to pay creditors at least part of their debt over a three to five year period. The amount paid depends on your current income and the value of your assets.The trustee would collect your payments, generally on a monthly basis, and pay the money out to creditors over the contemplated period. Assuming the successful completion of the plan, a discharge would then be received and the unpaid balance would need not be paid.
Bankruptcy is a Federal law for the benefit and relief of creditors and their debtors in cases where the creditor is unable or unwilling to pay their debt.
Bankruptcy legislation serves a dual purpose :
To effect a quick, equitable distribution of the debtors property among his or her creditors
To discharge the debtor for their debts, enabling them to rehabilitate themselves and start afresh.
Sounds tempting, right Consider this:
Bankruptcy stays on your credit report for up to ten years.
You will have difficulty getting future credit such as mortgage loans.
Any credit you get will probably cost you more in terms of interest rates and fees charged.
Alimony, child support, and most taxes survive bankruptcy and will still be owed
Bankruptcy does not wipe your credit slate clean and give you a fresh start.Bankruptcy should be a last resort to solving financial problems used only when the amount of debt is so great and the creditors so unrelenting that no other way out. There are two types of bankruptcy available to most people, Chapter 7 and Chapter 13.
Chapter 7
Chapter 7 bankruptcy is referred to as "straight bankruptcy" or "liquidation," because the debtor's unprotected assets are converted to cash and disbursed to the debtor's creditors to repay part of the debt owed.
Any person, partnership and most corporations can file Chapter 7.
Chapter 13
Chapter 13 bankruptcy affords the debtor the opportunity to repay all or part of his debts over an extended time period. This plan requires that the debtor have a consistent income to make future payments for the duration of the plan.
Chapter 13 is designed for consumers who need relief from their creditors and collection activity to reorganize their debts and devise a plan to repay them. The debtor is allowed to keep all of his assets, including those not exempt and not mortgaged.Both types of bankruptcy may get rid of debts where creditors have no specific rights to property, and may stop foreclosures, repossessions, garnishments, utility shut-offs and debt collection activities
Think about bankruptcy as a last resort.
Here are a number of alternative ways to fix your finances without risking your credit rating:
Rather than trying to avoid your creditors, talk to them.
Let your creditors know that you would like to work out a plan to begin paying off your debt.
Other Articles
