Understanding the different kinds of bankruptcy

If you are considering bankruptcy as an option for reorganizing your debt, you may be overwhelmed by the different options and the differences between each. Luckily, understanding them is not difficult, and you should be able to determine which will be the best for your situation. According to a recent study, the most common cause of bankruptcy for men and women alike is living beyond their means. No matter what circumstances may have led you to consider bankruptcy, however, you should be informed about the options you have.

Chapter 7 is for individuals and businesses

Chapter 7 bankruptcy is arguably the most common form of bankruptcy in the country. Every year, thousands of people file for it in an attempt to relieve their debt. Unlike some other forms of filing, this option is designed for individuals and businesses alike. Under its conditions, there is no repayment plan, but rather the liquidation of assets is used to fund the claims of creditors.

Chapter 9 is for municipalities

Chapter 9 is less common than chapter 7, and it is designed primarily for municipalities that are under financial duress. Filing provides the municipality with protection from the claims of creditors, and a plan is created to repay the remaining debt. Cities, school districts, townships and counties are eligible for this type of bankruptcy.

Chapter 13 is for individuals

In addition to chapter 7, chapter 13 is one of the most commonly chosen forms of bankruptcy. It is also called a wage earner's plan, and it gives filers who have a regular income the ability to repay debts through a repayment plan. The plan is proposed by the debtor and repaid in installments over the course of three to five years. Unlike chapter 7, wherein debts may be forgiven but property must be liquidated, chapter 13 allows debtors to retain their assets.

Chapter 12 is for farmers and fishermen

Chapter 12 is only for family fishermen and farmers who are facing financial burden as a result of debt. This special form of filing was established to provide additional protections to fishermen and farmers. Some of these protections include the concession of additional time for repayment and favorable terms for the repayment agreement. It is much like chapter 13, otherwise, in its structure and terms.

These are some of the most common forms of bankruptcy, but you can determine the one that is best for you by reaching out to a lawyer. Doing so may help you overcome your debt once and for all.

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