What is bankruptcy all about?
Before filing bankruptcy, make sure you know what you are getting into. Bankruptcy allows individuals and businesses to eliminate or repay debt. In the United States there are several categories of bankruptcy. These include chapter 7, chapter 13, chapter 9, chapter 11, chapter 12 and chapter 15. Chapter 7 is the most frequently filed. Let’s review what each chapter covers.
Chapter 7 bankruptcy can be filed by an individual or a business. The process takes anywhere from 3 to 6 months. Some of your personnel property may be sold to repay debt owed. Unsecured debt will be erased. You will be able to keep property that is exempt. Property that is exempt includes clothing, cars and homes. If you have a car loan, you will need to return the vehicle or keep making payments. Bankruptcy will not erase debt from medical bills, child support, student loans or spousal support. Also any taxes owed will not be erased.
With chapter 13, you must have income to repay a portion of your debt. With this option, you will set up a repayment plan. The amount of your payments will depend on income earned. The process lasts 3 to 5 years. The debt must fall into certain guidelines. You can not have more than £1,010, 650 in secured debt or more than £336,900 in unsecured debt. Chapter 13 gives you a chance to makeup past due payments.
Businesses that are struggling financially may file chapter 11. Chapter 11 gives the business time to reorganize their finances. Individuals may also apply for chapter 11, but it can be expensive and very time consuming. Chapter 12 is similar to chapter 13, but with higher debt ceilings.
Before filing for bankruptcy you will need to know some basic facts. Bankruptcy will not wipe out all debt. It will not clear any liens against property or vehicles. Also if you owe any traffic violations, these will not be cleared. It can stop harassing phone calls from creditors. Filing for bankruptcy may also stop collection activities. Before filing for bankruptcy, speak to a lawyer. He/she can provide alternatives.
