What is Bankruptcy?
Bankruptcy is a legal operation that serves to offer individuals and businesses a new beginning that can no longer repay their outstanding debt with the protection of the federal bankruptcy court. For the most part, bankruptcies fall into one of two types of either liquidation or reorganization.
What is a Chapter 7 bankruptcy?
Some people refer to chapter 7 bankruptcy as a “liquidation bankruptcy” because it discharges most of your unsecured debt. That included credit card debt, medical bills, and personal loans.
Chapter 7 bankruptcy is the quickest form of filing and wipes out most debts within months of filing. You must pass a “means test” to qualify for a Chapter 7 filing. This “means test” examines your financial records that include income, expenses, secured and unsecured debt. You must qualify under income limits that vary by state. You may be forced to sell any non-exempt assets, but important assets like a home, car, equipment for work, are exempt and can be retained.
What is a Chapter 13 bankruptcy?
A chapter 13 bankruptcy also referred to as a “wage earner’s plan. It is used by individuals who are forced to use this particular type of bankruptcy based upon the income calculation required by the bankruptcy code. Under this chapter, it enables them with regular income to develop a plan to repay all or part of their debts and propose a repayment to make installments to creditors over three to five years.
In both a chapter 7 and 13 bankruptcy the debtor ends up with a discharge of debt. The debtor is then relieved from an obligation to pay certain debt like credit cards and medical bills.
What is a Chapter 11?
A chapter 11 bankruptcy is most commonly used for businesses and corporations when money is tight and they are having trouble making their monthly bills. It is more effective for high debt/high asset individuals and businesses.
With this chapter of the bankruptcy code, it provides for reorganization to keep the business with heavy debt to pay creditors over time.
Let one of our trained debt consultants evaluate your financial situation to determine if bankruptcy may be right for you.
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