What Are The Different Types Of Personal Bankruptcies – Bankruptcy is a legal process that begins when a person or business cannot pay their outstanding debts or obligations. It offers a fresh start for people who can no longer afford to pay their bills.
Bankruptcy proceedings are initiated by the more common debtor or on behalf of the less common creditors. All of the debtor’s assets are measured and appraised, and the assets can be used to pay off a portion of the outstanding debt.
What Are The Different Types Of Personal Bankruptcies
Bankruptcy gives an individual or business a chance to start over by forgiving debts they can’t pay. At the same time, creditors have the ability to receive payments based on the assets available to liquidate an individual or business.
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In theory, the ability to file for bankruptcy benefits the overall economy by giving people and companies a second chance at credit. It also helps the creditors to recover part of the debt repayment.
All bankruptcy cases in the US go through the federal courts. The bankruptcy judge makes decisions, including whether the debtor has standing to file or whether the debtor should be discharged.
Bankruptcy administration is often performed by a trustee appointed by the United States Department of Justice’s Trustee Program to represent the debtor’s estate in court proceedings. Unless the creditor objects, the debtor and the judge usually have no contact. After the bankruptcy proceedings are completed, the debtor is released from debt obligations.
Bankruptcy filings in the US are classified according to the application of the bankruptcy code. For example, Chapter 7 involves the liquidation of assets, Chapter 11 deals with the reorganization of companies or individuals, and Chapter 13 regulates the repayment of debt through debt reduction agreements or special payment plans.
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Bankruptcy filing costs vary depending on the type of bankruptcy, the complexity of the case, and other factors.
Most people file for Chapter 7 bankruptcy, which allows you to pay off unsecured debts like credit card balances and medical bills.
If you have non-exempt assets, such as family heirlooms (valuable collections such as coin or stamp collections), second homes, or investments such as stocks or bonds, you must liquidate the estate to pay off some or all of your unsecured debts.
When you file for Chapter 7 bankruptcy, you sell your assets to pay off debts. People with no valuable assets and only exempt assets, such as household goods, clothing, tools of their trade, and personal vehicles of a certain value, can qualify for unsecured debt. they may not pay.
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Businesses often file for Chapter 11 bankruptcy in order to reorganize and continue their business. Filing for Chapter 11 bankruptcy allows a company to plan for profitability, cut costs, and find new ways to increase revenue. Its preferred shareholders, if any, can receive payments despite the fact that common shareholders are the last.
For example, a home business that files for Chapter 11 bankruptcy may raise its rates slightly and offer more services to generate revenue. Chapter 11 bankruptcy allows a business to continue operating without interruption while working on a court-supervised debt repayment plan. In rare cases, individuals can file for Chapter 11 bankruptcy.
Individuals who earn too much money to qualify for Chapter 7 bankruptcy can file under Chapter 13, also known as a wage garnishment plan. It allows individuals as well as businesses with fixed income to create debt repayment plans.
Payment plans are usually made in installments of three to five years. These debtors are allowed to keep all of their property, including property not otherwise exempt, in the courts’ discretion, in exchange for repaying their creditors.
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Although Chapter 7, Chapter 11, and Chapter 13 are the most common types of bankruptcy proceedings, there are several other types:
When a debtor receives a discharge order, they are not required by law to pay the debts specified in the order. In addition, you cannot legally engage in any collection activity (such as making phone calls or sending letters) against the debtor while the cancellation order is in effect.
However, not all debts are eligible for repayment. Some of these include tax claims, unrecorded items owed by the debtor, child support or alimony payments, personal injury debts, and debts owed to the government. In addition, any secured creditor may foreclose on property owned by the debtor if the lien is still valid.
Debtors are not entitled to dismissal. When a bankruptcy petition is filed, creditors are notified and can object if they wish. If so, they must file a complaint before the deadline. This leads to debt collection or instructions by the opponent.
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A Chapter 7 discharge is usually granted about four months after the debtor files for bankruptcy. In any other type of bankruptcy, it can be discharged when practical.
Filing for bankruptcy can help relieve you of your legal obligation to pay your debts and keep your home, business, or financial ability, depending on the type of bankruptcy you file. But it can lower your credit score, make it harder to get a loan, mortgage or credit card, buy a home or business, or rent an apartment.
If you decide to file for bankruptcy, your credit is already damaged. However, it’s important to note that a Chapter 7 filing stays on your credit report for 10 years, while a Chapter 13 stays for seven years. Any lender or creditor you apply for new debt (such as a car loan, credit card, line of credit, or mortgage) will see a charge on your report, which could prevent you from getting a loan.
Negotiating with your creditors without involving the courts can sometimes be beneficial to both parties. Rather than risk getting nothing, the lender may agree to a payment schedule that reduces your debt or spreads your payments over a longer period of time.
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If you can’t make your mortgage payments, you should call your credit union to find out what your options are if you don’t file for bankruptcy. These may include forbearance, which allows you to stop payments for a period of time, or a payment plan designed to stretch out smaller monthly payments.
Another option is a loan modification, which permanently changes the terms of your loan (such as lowering the interest rate) to make it easier to pay. However, beware of unsolicited offers from companies that claim they can save your home from foreclosure. They may be nothing more than scammers.
If you owe back taxes to the IRS, you may be able to get an offer in compromise that allows you to pay less than what you owe the agency. In some cases, the IRS offers monthly payment plans for taxpayers who cannot pay their tax obligations all at once.
One downside to filing for bankruptcy is the immediate, large, and negative impact it can have on your credit score. Bankruptcy stays on your credit report for seven to 10 years. As a result, borrowing becomes more difficult and more expensive. Depending on the type of bankruptcy, you may lose assets such as your home and car.
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For some people or businesses, unfortunately, bankruptcy is the right choice. If the debts are too much to manage, an alternative may be to liquidate all your assets and take legal action for non-payment or breach of contract. Despite the damage to your credit and reputation, bankruptcy is a legal way to avoid this type of worst-case scenario.
Bankruptcy can restructure or eliminate many types of unsecured debt, such as credit cards or personal loans. In bankruptcy, other debts cannot be discharged. The US Bankruptcy Code lists 19 different categories of debt that cannot be discharged;
If you bought your car with a loan, your car can be foreclosed on during the bankruptcy process. However, you can usually keep your car while you refinance your auto loan and make your payments. Likewise, if you file for bankruptcy, even if you owe it, you can keep making payments, and you don’t own more than what is allowed under state and federal bankruptcy laws. you can save.
Bankruptcy is a legal process, so it begins when the debtor files with the appropriate bankruptcy court. This is often achieved with the help of a lawyer who specializes in this type of case.
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Bankruptcy can provide financial benefits by eliminating debts you can’t pay and helping you get a fresh start, but there are consequences. A bankruptcy on your credit history can hurt your credit score and make it harder to get credit in the future.
Before filing for bankruptcy, consider all of your debt settlement options, including a debt consolidation program and renegotiating terms with your creditor. Consider consulting a professional financial advisor