Bankruptcy is often an undesired situation in an individuals life. The laws set to oversee bankruptcy usually vary but often share some guidelines. There are several types of bankruptcy as dictated by the laws but there are two which are mostly associated with individuals. These are chapter 7 and chapter 13. However, sometimes some individuals may opt for chapter 11 bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 is commonly preferred by individuals but also small businesses can use it. However, it is regarded as the harshest. You can also refer it as liquidation or straight bankruptcy.
The bankruptcy process involves the appointment of a trustee by the court handling the case who is to take charge of the owner’s assets. The individual is then allowed to only remain with the exempt assets which are usually basic household properties such as clothing. The non exempt assets are sold by the trustee for cash. The cash goes to pay up the debts that the individual had.
When the process of paying up debts is over, all other debts that still exist may be discharged in that they are done away with. Once Chapter 7 is has been completed the bankrupt individual is permitted to keep the income or assets he acquires thereafter.
The whole process takes a considerably short period of time may be four to six months. The next filing, if there is need for any, will have to wait until after six years.
The urge to file for this process is usually brought about by an accumulation of bills or payments that over time become too much to pay. It also preferred by unemployed individuals who know they will not be able to pay their bills.
Chapter 13 Bankruptcy
Chapter 13 is another type of bankruptcy that individuals go for. It greatly contrasts with Chapter 7. An individual debtor whose source of income is reliable steady is the one to benefit from this bankruptcy process.
In this process, the debtor is given a specified time period which ranges from three to four years to clear all the debts. This referred to as a repayment plan which are usually formulated by the bankruptcy filer. However, this repayment plan is still subject to a confirmation hearing by the court which may decide for or against it.
This process allows the individual or debtor to retain his or her assets. Some debts may be discharged depending on the income of the individual. However, secured debts which include mortgages and car loans plus arrears such as taxes have to be paid in full.
An individual can file for this bankruptcy over any period as time restrictions have not been placed. However, the debt accumulated by an individual has to be a certain limit in order for the file to have a chance of being accepted in the courts.
Chapter 11 Bankruptcy
Chapter 11 usually involves a process almost similar to chapter 13 but it is more complex. It is not out of reach from individuals as some file it but is usually for late businesses.
The different types of bankruptcy for individuals varies according to the situation an individual as we have seen for chapter 7 and Chapter 13.