Bankruptcy Chapters
Bankruptcy can be a little confusing if you do not know all the facts. There are five types of bankruptcy that are very common, they are known by what chapter they are. Chapter 7, which is also known as liquidation, allows businesses or individuals to relinquish nonexempt assets and simply walk away from most of their debts. In order to take part in a chapter 7 bankruptcy, the debtor's income must be below their state's median income level.
Chapter 9 and Chapter 11 bankruptcies are very similar. They are also known as reorganization. In a chapter 9 or a chapter 11 bankruptcy the debtor, whether it is an individual or a business, restructures their debt so that they will be able to pay it off. They also allow the debtor to retain some assets while paying off their debt. Chapter 12 bankruptcy is primarily for family farmers and fisherman who maintain a regular income, to reorganize their debt, and allows them to over three years to pay off their debt. Chapter 13 is the most commonly known of the bankruptcy chapters. It is for individuals who need to reorganize their debt. Some of the debtor's creditors will be repaid the full amount owed including interest, while other creditors will only be paid back a percentage of the total amount owed.
Chapter 13 is mainly used by debtors who do not qualify financially to file a chapter 7 bankruptcy. Retaining the assistance of an accountant or a financial advisor is always a wise decision when considering filing bankruptcy.
Contributing National Payday Staff Writer
Other articles of interest: