Different Types of Bankruptcy
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Filing for bankruptcy can be done by anyone. There are two different types of bankruptcy to file, and both of these types will apply to whether the party that will be filing is a business, an individual or a group or organization of people. Thus, before considering the option of bankruptcy, it would be best to have a basic understanding of what these bankruptcy types are.
Chapter 7 bankruptcy is also known as a liquidation bankruptcy and can be used for individuals or businesses. In this type of bankruptcy, the nonexempt property (luxury items or business assets) of the debtor is sold in order to pay his creditors. This type of bankruptcy accounts for almost 75% of all bankruptcies that have been filed.
Chapter 11 Bankruptcy is more suited for larger businesses. This is a similar type of Bankruptcy to Chapter 13, however, Chapter 11 has more requirements that need to be complied with. Chapter 11 Bankruptcy will be the more preferred option if what a debtor wants is a plan where he can pay off all his debts and re-establish creditworthiness.
Chapter 12 Bankruptcy is also known as a voluntary bankruptcy. This type is more suited for fishermen or farmers. Chapter 12 Bankruptcy allows a debtor to create a plan to paying off a part, or all, of his debts over a specific period of time. Chapter 12 Bankruptcy is less expensive than Chapter 11 Bankruptcy.
Chapter 13 bankruptcy is one that offers individuals a plan of repayment. Usually, the debtor is given three to five years to pay off his debt. Chapter 13 bankruptcy allows a debtor to separate creditors in a way that each creditor will receive a different percentage of payment from the other. In this way, a debtor’s own debts will be treated differently than the debts that he has accumulated with a co-debtor.
Of the different types of Bankruptcy, the two most commonly preferred are Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. For help with any Debt info, and to find ideas and advice on how to avoid getting into debt, go to debtinfocentre.com.
