How To File BankruptcyBankruptcy is a very serious affair, involving lawyers, courts and quite a bit of money. Bankruptcy is a proceeding in a federal court in which a debtor's assets are liquidated and the debtor is relieved of any further liability. Chapter 7 deals principally with liquidation, while Chapter 13 deals with internal reorganization. Bankruptcy is about starting over and getting a fresh start and getting back in control of your financial future. Chapter 7 bankruptcy is often referred as a "straight" bankruptcy or a liquidation. In Chapter 7, debtors are allowed to keep a certain amount of property, referred to as exemptions, where they cannot be seized during the bankruptcy procedure. Chapter 7 and Chapter 13 bankruptcy apply primarily not only to individuals, but sole proprietorships as well. Under Chapter 7, the trustee will sell assets to satisfy their outstanding debts and discharge debts that can't be satisfied with the available assets. Chapter 7 debtor cannot receive a discharge if they received one within the previous eight years. Chapter 13 is the second most popular type of bankruptcy, where Chapter 13 is best suited for those situations where you are best off paying your debts but you need more time than your creditors will allow. Under Chapter 13, the trustee will set up a three to five year repayment plan for the debtor to repay debts from their current income. Thus Chapter 13 bankruptcies are often called a "wage earner plan", where the court-supervised installment payment plan that does not require the approval of creditors. There are certain debt situations where filing a Chapter 7 bankruptcy is not in your best interest. Chapter 7 bankruptcy is liquidation of all of your assets in an attempt to repay your creditors, but for people who have substantial property and an income, this type of liquidation may not be in their best interests. Chapter 11 bankruptcy is a business reorganization plan and is used by corporations and small business owners in order to reorganize their debt. For those who have assets which exceed the limits of a Chapter 7 filing, a Chapter 11 bankruptcy is usually the best path. Bankruptcy is effective in eliminating or restructuring unsecured debts, typically credit cards, medical bills, personal loans, and claims for repossessed vehicles, and certain older income taxes. Bankruptcy is the last option any person wants to take, due to the fact it can cause your credit rating to go down. |