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 Bankruptcy Articles


Currently in America, there are four types of bankruptcy cases recognized under federal law: chapter 7, 11, 12, and chapter 13. The federal government created several types of bankruptcy clauses, entitled chapters, because their governing provisions are divided into separate chapters of the Bankruptcy Code. Each type of bankruptcy chapter is unique due to the fact that not every bankruptcy provision applies to the same individual or case.

Chapter 7 Bankruptcy
Chapter 7 bankruptcy law, also known as liquidation bankruptcy, allows a person to seize their assets for the elimination of their debts. This is the most common bankruptcy proceeding by individuals and corporations. The liquidation process relieves you of the majority of your debts including credit cards, utilities, and medical bills. Once liquidation bankruptcy is declared, all non-exempt property is given to a trustee, who then sells it in order to repay creditors. Real estate, cars, jewelry, art, and other valuables such as stocks and bonds are all assets which can be liquefied and given as payments to creditors. However, there are debts which cannot be eliminated under the chapter 7 bankruptcy laws. These include student loans, criminal fees, and child support payments. If one has declared liquidation bankruptcy, it remains on his or her credit report for 10 years, and he or she will be considered a high credit risk by future lenders.

Chapter 11 Bankruptcy
Generally, a chapter 11 bankruptcy law is used to reorganize a business’s debts. This is typically called a reorganization bankruptcy strategy. A debtor in a chapter 11 bankruptcy case usually files a petition which includes a list of assets and liabilities, and a detailed financial statement. Typically, the debtor acts as his own trustee and remains in possession of all non-exempt property. The court supervises the reorganization of the company’s debt obligations and monitors the organization under bankruptcy until all debts have been paid including interest.

Chapter 12 Bankruptcy
Chapter 12 bankruptcy is similar to a chapter 13 bankruptcy, but is specifically for fisherman and farmers. It provides for the exemption of property required for the maintenance and growth of their profession.

Chapter 13 Bankruptcy
The chapter 13 bankruptcy law varies from liquidation bankruptcy because it allows you to restructure your debts by creating new more manageable payment plans. This is the second most common form of bankruptcy people declare for. Most people are allowed to retain their non-exempt property when they file for chapter 13 bankruptcy because they do not posses as much debt or have a more steady income than those filing for chapter 7. One should only apply for chapter 13 when their income is high enough, so they can pay their normal expenses as well as their old debts. This is a much lengthier process than liquidation bankruptcy since the restructuring process ranges from 3 to 5 years. Chapter 13 remains in your credit history for 7 years from the date of filing.
The different types of bankruptcy chapters were created in order for people to financially start over and get a fresh start. One should carefully analyze the different types of bankruptcy chapters created, in order to decide which one pertains to them so they can get back in control of their financial future.



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