3 Types Of Bankruptcy You Need To Understand
Let’s just admit it: Bankruptcy is an ugly word. Nobody likes to hear it, nobody likes to think about it, and certainly nobody likes to experience it.
The reality is that people are experiencing bankruptcy every day at alarming rates, and many of them are not gathering the information they need to make the best possible decision. Bankruptcy is not child’s play, and you certainly do need to take it seriously. Taking a few minutes to understand the three most common types of bankruptcy is the best way for you to start gathering bankruptcy information.
For troubled businesses, Chapter 11 bankruptcy is the most common form of bankruptcy. You probably heard the term “Chapter 11” tossed around quite a bit after the terrorist attacks of 9/11. Some of the major airlines filed for this type of bankruptcy in order to reorganize their corporations and still stay in business. In this article, information will be provided about bankruptcy that will require a person to hire bankruptcy lawyer san diego. The recognizing of the case should be the first duty of the debtors.
Individuals like yourself will most often not file Chapter 11 bankruptcy because it is specifically designed for corporations that want to maintain ownership of their assets while they try to work out a plan with their creditors.
For some individuals in dire financial situations, Chapter 13 bankruptcy is a viable option, but it not the most common. A Chapter 13 filing is much like a Chapter 11 that corporations use, but it is designed for individuals. This type of filing allows you to maintain ownership and control of your assets while you participate in a four to five-year plan to repay your debts to creditors. This repayment plan has to be approved by your creditors, and you can then begin to work toward restructuring your financial situation while making regular payments to creditors.
A Chapter 7 bankruptcy is the most common type filed by individuals in financial trouble. When people say, “I am going to file bankruptcy,” this is usually what they are talking about. Chapter 7 bankruptcy is commonly referred to as a “liquidation bankruptcy”, because a majority of your personal assets will be sold to pay off as much of the existing debt as possible. If your assets are sold and the debt is still not paid off, then the debt can be “discharged”. This means that the creditor will basically chalk it up as a loss and release you from further responsibility.
Whether you believe that Chapter 7, Chapter 11, or Chapter 13 bankruptcy may be right for you, please understand that this is not an easy fix. The consequences of filing for these types of bankruptcy will stay with you for 7-10 years. If you have not yet considered any alternatives to bankruptcy, that should be your first step.
You have found yourself in an unfortunate situation, but don’t make it even more unfortunate by rushing in and choosing the wrong option for your particular situation. You’ve made a wise choice to first understand the types of bankruptcy. Now continue to get educated on your options and face the situation head-on if you truly want the best possible outcome.