Do you feel like you’re crushed by debt and can’t find a way out? It can weigh on you heavily and severely disrupt every aspect of your life.
There is light at the tunnel, though. You could consider filing for bankruptcy. Over 750,000 businesses and consumers filed for bankruptcy in 2018.
If you want to explore filing for bankruptcy, you should start by knowing the different types of bankruptcies.
Keep reading for the different bankruptcy chapters explained.
Chapter 7 is for individuals who have a lot of consumer debt with no way to pay it back. You may have a lot of credit card and medical debts and faced a loss of income or job loss.
In this case, you can liquidate your debt and undergo financial counseling to resolve your debts. Some of your assets may be liquidated to pay the debts off.
Can you keep your home and your car in a Chapter 7 bankruptcy? In most cases, you can.
Chapter 11 used by businesses or by high-net-worth people with a lot of tangible assets. Chapter 11 is a reorganization debt, rather than completely liquidating debts.
With this form of bankruptcy, businesses still have control over the operations of the businesses. A trustee is assigned to your case to plan how you will repay your debts.
Your debts are usually paid off over a three to five year period, giving you more financial flexibility. Some of your debts may be discharged.
Chapter 13 can be used by individuals to resolve their debts. In this case, you can restructure your debts and get a plan to pay them off. Some of your debts, like credit cards, may be discharged and you’re on a payment plan for the rest of the debt.
Chapter 13 is usually for people who have a steady income, but they also have a lot of debt.
Are you better off restructuring your debts or liquidating them? It really depends on your personal situation. You want to talk to bankruptcy specialists who can look at your debts, your assets, and help you determine the best course of action.
It may be hard to fathom, but municipalities can go bankrupt. The City of Detroit was the largest municipality to file for bankruptcy. Other than that, this is a rarely used part of bankruptcy law.
This allows towns to reorganize their debts, similar to a Chapter 13 bankruptcy. Debts are restructured and are on a schedule to be paid without cutting back on too many services for residents.
Bankruptcy Chapters Explained
No one ever wants to file for bankruptcy. However, it can be a way to get a fresh financial start and give you peace of mind.
These bankruptcy chapters explained will help you understand how bankruptcies work and how you can use them to get relief from crushing debt.
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