Personal Bankruptcy (part 3)

Types of personal bankruptcy

A personal bankruptcy can be set into play by you volunteering to do so or by force from your creditors. Personal bankruptcies fall into 2 different categories. The type of bankruptcy you use will depend on whether you have a source of regular income that will let you pay some of the money back eventually without you having to liquidate your assets. Liquidating your assets means selling stuff in order to pay back as much debt as you possibly can.

Chapter 7 Bankruptcy

This type of bankruptcy involves liquidation of all assets by the trustee appointed by a US Bankruptcy Court. The money earned from the selling of the assets is given to each creditor according to a predetermined priority status their claims are under. Meaning, depending on whom you owe and how much you owe, the court has come up with an amount of money each creditor will get from your stuff being sold by liquidation. After liquidation, you are freed of all dischargeable debts even though the asset liquidation may not have covered the total you owed. See, your creditors will get a reduced amount paid to them for each dollar you owe them. This is a settlement in a way. When you have to liquidate, you are usually permitted to keep items you have that are need fro personal upkeep such as your home and car.

Chapter 13 Bankruptcy

Many times, this type of personal bankruptcy is known as the wage earner plan. When you file for a Chapter 13, you are permitted to reorganize your debts and set up a repayment plan fro each of the companies you owe money to. This is usually at a reduced rate and you do not have to sell off your belongings. There is a time limit for this type of bankruptcy and it is typically 5 years and you even have the option of filing Chapter 7 at any time during this as well. In essence, this is a softer type of bankruptcy and offers you more options. There is even a more wide range when it comes to your discharge with Chapter 13 bankruptcy. Some debts will be discharged that are not eligible for discharge under Chapter 7 as well.

Worth mentioning: When you file for bankruptcy it becomes automatically illegal for creditors to pursue debt repayments from you. This is known as an automatic stay. Your bankruptcy process will create stress and hardship, but at least you will become free of phone calls from the companies you owe.

Now that we have described the two types of bankruptcies used by individuals, it is time to consider whether it is a good idea or proper fro you to do so. In our next section of this multi sectioned bankruptcy article, we will go over the issue of deciding whether or not to file. There are advantages and disadvantages to every bankruptcy, so be sure to read on to the next section of this article from Debtfree.24.com.

Part 4…

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