Types of Bankruptcy

Wednesday, November 16, 2011

It is one of the worst times of your life – being incapable of paying off your debts. It is good to know that the Federal Bankruptcy Law provides debtors with a new start. Filing a personal bankruptcy is an option when your debt is climbing at a rate which is faster than you can pay it off. With the aid of an experienced bankruptcy attorney who is knowledgeable when it comes to all bankruptcy questions and answers, you will be able to identify many other options. However, once you have discovered that bankruptcy is your only choice, you may start fling a petition that includes a statement of your assets and liabilities, plus a list of your creditors.

There are two kinds of bankruptcy. The first type is Chapter 7, the most common form of bankruptcy in the US. and filed in a federal court by an individual or business facing a great amount of debt and unable to pay it. The concerned must first meet some qualifications in order to file Chapter 7 bankruptcy like making less than the minimum income level of the state where he resides.

The second type is Chapter 13, filed by a debtor who owns valuable assets which he wishes to keep but are not covered by the state of federal exemptions like a house. Under Chapter 13, the debtor maps out a plan of payment with his creditors for a period of years. This plan of action works best for a debtor who has a steady source of income. Most often, creditors opts to receive payments sooner so they settle for less than the full amount owned by the debtor. Under Chapter 13, rules and regulations must be adhered to by both debtors and creditors which are made clear by the court.

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