Summary

Bankruptcy is the inability of an individual or organization to pay debts to its creditor. It is most often the last step one must do when one faces a serious financial hardship.

Many people and businesses unfortunately need to file for bankruptcy especially during unstable economic times. Depending on the situation, there are different chapters of bankruptcy that one can file for.

Most types of debt that can be consolidated when one files for bankruptcy are credit card debt, mortgage payments, car payment, student loans and personal loans. Alimony and child support payments are not included.

Details

There are different types of bankruptcy that can be filed. The most common of those that are filed are Chapter 7 and Chapter 11 for individuals. Business entities usually file under Chapter 7 and Chapter 13.

Chapter 7 bankruptcy is known as straight bankruptcy. It is filed by individuals as well as businesses and it entails liquidation of some assets to pay for unsecured debt. It is the quickest and simplest form of bankruptcy that can be filed.

This type of bankruptcy filing allows for the retention of property like a home or vehicle so long as mortgage and car payments are current. The goal of Chapter 7 is to eliminate unsecured debt like credit card bills.

Chapter 11 bankruptcy is also corporate bankruptcy wherein the company continues its functions while a financial reorganization is done. The company will be following a specified plan to repay their debts.

Chapter 13 bankruptcy allows the debtor to keep possession of their assets however; a portion of their income is used for debt repayment over a period of 3 to 5 years.

People who file for Chapter 13 must have a steady income that can cover their living expenses as well as the repayment of their debts. Car loans, student loans and arrears can be consolidated under Chapter 13.

Help

It may be hard to accept but there may come a time when filing for bankruptcy could be the only solution to one’s financial problems. During this time, a highly skilled bankruptcy attorney can help.

Your bankruptcy attorney must be able to inform you of the ins and outs of filing for bankruptcy and must be able to convey the information properly for you to understand clearly what the effects are of filing for bankruptcy.

A skilled bankruptcy attorney should be familiar with the qualifications and limitations of each bankruptcy chapter and also be knowledgeable in the procedures and the details of filing for bankruptcy.