Bankruptcy is normally something you hear struggling businesses go through in the news but if you are struggling personally, bankruptcy can be an option for you as an individual. There are a few reasons you may consider bankruptcy. You may have just lost your job, had an unexpected medical emergency, have just gone through a divorce, or maybe have had a death in the family. You are more than likely struggling to make ends meet and feel like you are buried in your debt. Bankruptcy should not be taken lightly and can be very intimidating for a number of reasons. Once you declare bankruptcy if will follow you for the next several years. And perhaps the most difficult step in the process of bankruptcy is going before a judge and telling them you can’t pay your debts. Based on your situation the judge will determine to either erase your debt or create a payment plan to pay them off. The two most commonly used types of bankruptcy are chapters 7 and chapter 13. There are actually six different types of bankruptcy options available and each of them offer different plans. Here you will be able to decide what form of bankruptcy best suits you.


Chapter 7

This type or bankruptcy is known as liquidation bankruptcy and is the most common type among individuals. A court trustee liquidates (or sells) your assets (things you own that have value) and use the money to pay off your creditors that you are in debt to. As for the debt that is unsecured, such as credit cards or medical bills, it is commonly erased. If you have student loans or are in debt to the government those debts will have to be paid off by you as bankruptcy does not apply. Depending on what state you live and file in will determine what items the court will and will not force you to sell. The majority of states allow you to keep the items that are considered essential like your car, home, and retirement accounts; but nothing is guaranteed to be completely off the table. It is important to note that by filing for chapter 7 bankruptcy will not stop home foreclosure, but it can postpone it.


The only way you will be able to file for chapter 7 bankruptcy is if the court rules that you do not make enough money to pay back your debt. They compare your income to the states average and also go into your finances looking for disposable income to be used to pay off some of the debt. If you end up filing for chapter 7 bankruptcy you will then have to go to a meeting with all the creditors you owe money to and they can ask you questions about your finances and debt. This type of bankruptcy will stay on your credit report for ten years and you cannot file for it again until after eight years.


Chapter 9

This chapter of bankruptcy is a type of repayment plan for municipalities. It helps school districts, towns and cities, and so on the ability to pay back the debts they owe.

Chapter 11


Chapter 11 bankruptcy is commonly used to reorganize debt for corporations or businesses. The business comes up with a plan approved by the court and creditors to pay their debts while still being able to operate. This type of bankruptcy can also be filed for those who make big time money with big time debt like celebrities or pro athletes so it is not commonly filed by the general public.


Chapter 12

This type of bankruptcy is a type of repayment plan used by farmers and fisherman that helps them to avoid selling their equipment or foreclose their property to pay off their debts. It is a little more flexible than chapter 13 and has a higher debt limit because it is their livelihood.


Chapter 13

This form of bankruptcy does not erase your debt but it provides you a payment plan to pay back a portion of your unsecured debt over the course of three to five years. The court bases your monthly payment on your income and also the amount of debt you have. They also help you to stay on a strict budged so you are able to make the payments agreed upon. This type of bankruptcy allows you to keep your assets. Alter filing it will stay on your credit report for seven years and you cannot file for it again until after two years has past.


Chapter 15

International bankruptcy is dealt with in this chapter. This gives foreign debtors access to U.S. bankruptcy courts.


Filing for bankruptcy should really only be a last resort as it affects your credit for the next several years and can make it harder to get a loan in the future. But sometimes, bankruptcy may be the only option left. If you push through it you will be able to get back on track and become financially independent once again.


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