Bankruptcy Facts You Need To Know Before Filing, Especially Chapter 13
If you have given some thought to filing for bankruptcy protection, there are a few things you should be aware of. Bankruptcy comes in a number of forms, and it does not always discharge all your debts. Let us look at some essential personal bankruptcy facts to help you make a more informed decision about your financial future.
First, there are several types of bankruptcy, the most common being:
– Chapter 7
– Chapter 11
– Chapter 13
Chapter 7 bankruptcy is also known as a liquidation. Under this type of filing, all your assets are turned over to the bankruptcy trustee and liquidated and dispersed to your creditors based on their claims.
Under Chapter 7, the credit card banks must work with the trustee to get repaid. Once the liquidation is complete, the debtor is released from any future obligations for the debts – the lenders cannot recover anything further in the future. This type of bankruptcy protection can only be used every 7 years.
Chapter 11 bankruptcy protection is for corporations, large and small, and entrepreneurs or self-employed people. This type of bankruptcy protection allows the businesses to continue running while re-structuring their debt to reemerge as a viable company. This is the type of bankruptcy you hear about when large corporations go bankrupt and reappear several months later with clean balance sheets.
With Chapter 13 bankruptcy, your debts are repaid through your future income rather than through liquidation of your assets. Under this type of personal bankruptcy, you get to retain your assets while working out a repayment plan with your creditors.
Under Chapter 13 bankruptcy, the court appoints a trustee who works with the debtor, the creditors and the court itself. During the repayment period, which can last up to five years, you are not allowed to sell any assets without court approval or take on any new debt. If any payments are missed, according to the plan agreed upon by all parties, a Chapter 13 bankruptcy protection may be converted to a Chapter 7 upon petition by any creditor.
An important aspect of bankruptcy that many people are not aware of is that it will not automatically discharge all debts, even in the case of Chapter 7 liquidation. If a creditor can demonstrate that your debt was incurred fraudulently the court may exempt that debt from the bankruptcy filing.
One surprising statistic shows that Chapter 13 bankruptcy protection works only 33% of the time. You should look for a better credit card debt solution to help you out of debt.
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