Bankruptcy Information

Chapter 13 Bankruptcy is another most common method to file bankruptcy. This bankruptcy is opposite of what the chapter 7 bankruptcy states. In chapter 7 bankruptcy the assets of the debtor are sold off by the appointed trustee and the debts are paid off to the creditors, while on the other hand the Chapter 13 Bankruptcy is about re-organization of debts, where the debtor get the chance to pay off the debts slowly by the source of income as per the wage earner plan that had been approved by the bankruptcy court.

This type of bankruptcy filing is determined by the most important aspect which is the disposable income of the debtor. In this the debtor if the debtor does not have the income to survive the necessary monthly expenses than he may not be eligible to file chapter 13 bankruptcy and rather go for chapter 7 bankruptcy. Chapter 13 bankruptcy provides the debtor with a plan to repay the debts within 3-5 years of time period. During this time period the creditors cannot approach the debtor for collection of the debt except from the bankruptcy court.

There are some advantages that are associated with the chapter 13 bankruptcy which include the stopping of foreclosures and have accelerated mortgage being reinstated when bankruptcy is fulfilled. Debts that are not discharged under chapter 7 can be done under chapter 13.

The disadvantage of chapter 13 bankruptcy is that it remains on the credit report of the debtor for 10 years and if the debtor wants to get additional loan he/she has to take permission from the trustee. These factors avoid the creditors to lend money to such individual or if they lend the money they charge very high interest rate.

We know that bankruptcy arises when a person is not in a situation to pay off the debts that were taken. There are many codes or chapters under which bankruptcy can be filed depending on the situation and case of the debtor. There are various chapters under which one can file bankruptcy like chapter 7, chapter 8, chapter 9, chapter 11, chapter 12, chapter 13, chapter 14, and chapter 15. All these bankruptcy chapters are meant for different purpose. 

The most common bankruptcy chapter that is filed by people is chapter 7 bankruptcy. Chapter 7 bankruptcy provides the option to the debtor to get rid of the debt that he owes. A trustee is arranged by the bankruptcy court which will sell off the assets of the debtor and settle the amount collected between the creditors. This chapter 7 bankruptcy is also known as liquidation and straight bankruptcy, as the assets of the debtor are liquidated to pay the debts. The advantage that the debtor gets is that, the debts are completely settled with the creditors by whatever amount has been collected through the liquidation of the assets. At the same time the debtor cannot continue its business operation as the assets are sold except of the exempted property as per the law. This provides the debtor to start a fresh financial life with no obligation.

It is not that anyone can file bankruptcy under chapter 7. There are certain eligibility criteria that a person has to fulfill. But now this is not only the case, the new bankruptcy law states that it is mandatory for a person to undergo the means test in order to become eligible for this bankruptcy. The Means Test is the test to find out the debtors income and the expenses in order to see the amount left after the deduction of the necessary expenses. If the amount left after deduction is less than the specified median income than you are eligible for filing chapter 7 bankruptcy, but if it exceeds the median income than it states that you are in state of paying the debts in monthly installments. In such cases the debtor needs to file chapter 13 bankruptcy which is reorganization of debts.

Bankruptcy is a situation when the person is unable to pay the debts that he has taken. This represents the person’s financial situation and the non-ability to pay back the loans. Once bankruptcy is filed by the debtor it will have its bad affect on the credit ratings. The debtor will become a bad credit holder as it will be registered in the credit report of the debtor. Bankruptcy is something that should be done by taking all its aspects in to consideration and by analyzing your situation.

There are various types of bankruptcies that are available for different situations depending on the case of the debtor and the financial status as well. There are six kinds of bankruptcy:

Chapter 7 Bankruptcy

This type of bankruptcy is complete liquidation of the assets to pay the creditors. This is personal bankruptcy.

Chapter 9 Bankruptcy

This is for municipal bankruptcy.

Chapter 11 Bankruptcy

This type of bankruptcy is for the reorganization of the debts and mostly used by the businesses.

Chapter 12 Bankruptcy

This bankruptcy is filed by the family farmers and fishermen.

Chapter 13 Bankruptcy

This type of bankruptcy is for personal use with the aspect of paying back the debts having some of the payment plans agreed by the creditors and the court.

Chapter 14 Bankruptcy

This is some kind of moral bankruptcy.

Chapter 15 Bankruptcy

This bankruptcy is generally used for international situations

Chapter 7 and Chapter 13 bankruptcy are the most important bankruptcy chapters and also the most common one. People usually file these two types of bankruptcy to settle their debts. A person should always consider the situation of bankruptcy as a serious one and also seek advice from professionals. They will let you know about which type of bankruptcy is suitable for you, or rather if you are comfortable with the laws than you can help yourself.

The inability to pay back the debts to the creditors by any individual leads to Bankruptcy. In other words it can be said that when the debtor cannot pay back the loan or the debt that was taken early due to the financial crisis makes him to file bankruptcy legally. By filing bankruptcy there are chances that the creditors will get paid at least some amount of the credit by the debtor.

Bankruptcy can be involuntary and voluntary. When the creditors file the petition against the debtor in order to get some amount of debt back it is called Involuntary Bankruptcy. But in the case of Voluntary Bankruptcy the debtor himself files the petition in the court. Bankruptcy law provides the plan to repay the debts by the debtor in some period of time. The basic motive of the bankruptcy is to provide a fresh start to the debtor to regain the financial status by removing all the previous debts and paying of the creditors debts by the resources available.

There are two forms in which bankruptcy can be resolved, liquidation and reorganization. Liquidation is the process in which the debtor’s unprotected assets are sold to repay the creditors who have higher priority over others. Whereas, in the case of reorganization, the debtor has the hold on the assets and the creditors are paid by the individual income of the debtor.

There are certain bankruptcy codes that are available to file bankruptcy, these codes are known as Chapter and have different functionality some of the chapter are chapter 7, 11, 13. The selection of the bankruptcy code totally depends upon the financial situation and the circumstances of the debtor.

Bankruptcy is an unforeseen event or unfortunate situation that can occur with any person. The person can be suffering from some kind of financial crisis and unable to pay the debts.