What Are The Types Of Bankruptcies

What Are The Types Of Bankruptcies – Bankruptcy is an option if you have a lot of debt. Find out if bankruptcy protection is right for you, the differences between bankruptcy types, when to file, and what to expect.

It can be confusing to distinguish between the different types of bankruptcy and know when it is appropriate to file for bankruptcy.

What Are The Types Of Bankruptcies

In this guide, we’ll cover the two most common types of bankruptcy, Chapter 7 and Chapter 13, and explain what happens when you file for bankruptcy, how to do it, and what to ask yourself to determine if bankruptcy is right. You.

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Bankruptcy is a legal process for individuals or companies that cannot pay their outstanding debts. You can go bankrupt in two main ways. A more common way is to file for voluntary bankruptcy. The second way is for creditors to ask the court to issue a bankruptcy order.

If you decide to file for bankruptcy yourself, there are several ways to do so. You may want to consult an attorney before proceeding so you can figure out what is best for your situation.

There are other types of bankruptcy filings that are less common and more expensive for small businesses, such as Chapter 11. This type of bankruptcy is for businesses with $2.5 million or more in debt, or businesses owned by an LLC or partnership. Chapter 11 bankruptcy is similar to Chapter 13, but generally only for businesses.

The Small Business Reorganization Act of 2019 made Chapter 11 less expensive for small businesses, giving them more flexibility in negotiating bankruptcy terms with creditors. But still much less common than Episode 13. If you think Chapter 11 bankruptcy is right for your company, you may want to speak to an attorney.

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Filing a bankruptcy filing automatically suspends your creditors’ claims against you. This means that your creditors should stop trying to collect the money you owe. They will not be able to:

Your case will be assigned to a bankruptcy trustee, an attorney who will oversee your case. The trustee will send notices to your creditors and schedule a hearing.

From there, the procedure depends on you filing for protection under Section 7 or Section 13 of federal bankruptcy law.

Chapter 7 is one of the most common types of bankruptcy. In Chapter 7 bankruptcy, you will:

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There are some assets you are allowed to hold, such as a limited amount of cash, clothing, household goods, and cars, but these exemptions vary depending on the state you live in.

After your assets are depleted and creditors are paid, any remaining debt will be forgiven until you can refinance the debt. Debt reaffirmation is when you voluntarily waive protection through a bankruptcy settlement and agree to remain liable for the debt. Reconfirmation is chosen to hold certain assets and avoid liquidation.

Not everyone can file for Chapter 7 bankruptcy. If your income is too high, you may need to file for Chapter 13 bankruptcy instead.

If you can’t file for Chapter 7 bankruptcy or if you have money to pay off creditors and the assets you want to keep, Chapter 13 bankruptcy may be an option for you. In Chapter 13 bankruptcy, you will:

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After these milestones are completed, any remaining outstanding debt will be written off.

Chapter 13 is a good option for someone on a steady income who has some money left to pay off their debts each month, but needs some breathing room and extra time to catch up.

Depending on how you choose to declare bankruptcy, your assets and liabilities will be affected in different ways. In Chapter 7 bankruptcy, most of your assets will be liquidated to pay your creditors with money. In Chapter 13, you hold your assets while you work on a repayment plan for your outstanding debts.

For small business owners with a lot of personal debt, bankruptcy can help keep their businesses afloat. It is important to remember that business debts are not paid under Section 7 or Section 13 unless you are the sole proprietor and you are personally liable for them.

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Certain business assets may be exempt from Chapter 7 bankruptcy filings. For example, if your business is services-based and does not hold equipment or significant inventory, you can continue your business after you pay off your business debts through bankruptcy.

No amount of bankruptcy can eliminate student loan debt. Certain individuals, such as certain government employees, are eligible for student loan forgiveness unrelated to filing for bankruptcy.

If you need help managing your student loan debt, you should contact your creditor to discuss repayment options or get help with debt consolidation.

In a bankruptcy filing, your home and mortgage will be referred to as assets to determine your solvency. Depending on the type of bankruptcy filing you file, your mortgage can be affected in different ways:

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If you choose to reconfirm your mortgage in Chapter 7 bankruptcy, you may be stuck with your debt obligations after your bankruptcy proceedings. If you can’t pay it back, you won’t be able to file for Chapter 7 bankruptcy again for several years, and creditors can sue you to collect the debt.

To declare and file bankruptcy, you will need to complete a credit counseling course to learn about bankruptcy, alternative options, and managing your own finances.

After completing the course, you must file a petition with the United States Bankruptcy Court in your federal jurisdiction. This app will list:

You must also submit a copy of your most recent tax return with your application. You can have an attorney prepare the petition for you or get bankruptcy forms and instructions from a U.S. court.

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Chapter 7 is sometimes referred to as “simple bankruptcy.” Chapter 7 bankruptcy leaves your non-exempt assets to pay off as much of your debt as possible. Cash from your assets is distributed to creditors such as banks and credit card companies, and you’ll typically receive notice of discharge within four months.

To file Chapter 7, you must pass the bankruptcy means test. The only exemptions from this are disabled veterans who file for bankruptcy while on active military duty, or those who borrow money from running a business.

Your bankruptcy record will remain on your credit report for 10 years. But for many people, Chapter 7 offers a fresh start.

Chapter 13 bankruptcy is also known as restructuring bankruptcy. Chapter 13 allows people to pay off their debts in three to five years. For individuals with consistent, predictable annual income, Chapter 13 provides a grace period. At the end of the grace period, the remaining debts are settled.

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Once approved by the bankruptcy court, creditors must stop communicating with the debtor. Bankruptcies can then continue to work for years and pay off their debts and still hold their property and assets.

Most people take their financial obligations seriously and want to pay off their debts fully, but knowing when to file for bankruptcy and when to negotiate or use other strategies can help you stay on track to being financially healthy.

Here is a list of questions that can help you assess your financial health and give you insight into whether bankruptcy would be right for you. You should also discuss these questions with a lawyer.

Credit cards often carry high interest rates on open balances. This means your balance can increase quickly if you make the minimum payments. If your balance is high to begin with, it can quickly spiral out of control.

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Constant phone calls from collectors can be annoying and stressful reminders of your debt. Contact each of your creditors and see if they are willing to negotiate a lower balance or lower monthly payments.

Paying for essentials with a credit card charges interest on these purchases. Therefore, you should aim to pay for these items with a single debit card.

Debt comes from many sources. Consolidating your payments into one larger loan can help you more easily track outstanding debt with one monthly payment. This can save more time on your repayments as the new loan will come with new payment terms.

Downsizing from a home or getting rid of a car can be tough, but taking these hard steps can help you pay off debt and avoid bankruptcy.

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Your expenses should ideally be covered by your income, providing some buffer room for emergencies. If your monthly payments are more than your take-home pay, you are a potential bankruptcy candidate.

Uncertainty about your total outstanding debt is cause for concern. If your balance has grown and you are unaware of the total, or if you have forgotten that your creditors sent your debt to collection, if you cannot keep track of how much you owe, you should consider alternative payment options.

Bankruptcy does not resolve all debts indiscriminately. Some debts, such as student loans, cannot be paid in the event of bankruptcy. If you are having difficulty paying debts that the bankruptcy cannot meet,

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