Last Updated on Thursday, 27 December 2012 02:19 Written by Ebiz Friday, 28 December 2012 09:05
When times get tough financially and there doesn?t seem to be any other way of getting out of debt, many people that filing Bankruptcy is their only option. With over 1.2 million people filing in 2012, is this really the solution for everyone experiencing a financial storm? Perhaps more of an emphasis needs to be put on education ourselves about what bankruptcy is, how it works, and how it will affect us in the long run should we choose to that route.
There are various chapters of bankruptcies; it all depends on the individual. There are basically four bankruptcy filings. there?s a Chapter 7(liquidation), a Chapter 11(reorganization) , a Chapter 12(adjustments for farmers) and a Chapter 13( adjustments for individuals).
The chapter of filing that you choose depends on the person?s financial situation. The most common filing is Chapter 7. Married couples, companies and individuals are all eligible for a Chapter 7.
A debtor filing Chapter 7 is throwing everything away and starting over hoping for a clean slate. Once you file, an trustee will be appointed to maneuver the sale of the individual?s assets. This does not mean that you will lose everything you own, you might be able to keep some property such as your primary residence and personal items such as clothing and your vehicle. Once the debtor?s assets are sold, the trustee pays certain creditors a portion of the monies due.
Not all creditors receive monies; some creators must ?forgive? or ?discharge? the obligation. After you have?filed?a Chapter 7, and it is accomplished, you cannot file another bankruptcy for seven years. The debts that were not forgiven in the first bankruptcy, will not be forgiven in the next. The usual debts that will not be forgiven are alimony, child support and taxes. Student loans are seldom forgiven or discharged, as well, so if your debt falls into these categories, Chapter 7 bankruptcy is not your best option. You need a Chapter 13
Chapter 12 and 13 are basically the same, however, Chapter 12 deals with farmers with a regular income and Chapter 13 deals with?individuals?with a regular income. Your income has to be reliable and steady, and your debt has to be under $269,250 in unsecured debt and $809,750 in secured debt. Then, the debtor and the trustee developed a proposal for a repayment plan to all your creditors.
The court has the final say, as to where the funds go, and the repayment procedure can last for three to five years. The reason that debtor file for a Chapter 11 or a Chapter 13 is because they do not have to liquidate their assets and can keep everything. In addition, the debtor is only paying a percentage of what he or she owes, 30 to 50 cents on the dollar.
For a Chapter 11, the limit of indebtedness is not challenged. The Chapter 11 was originally intended for cooperation?s and businesses. The feature is basically the same as in the other bankruptcy chapters, but the trustee of the client in Chapter 11 is able to operate the debtors business. The business owner is now able to reconstruct his business, acquire financing and loans, reject and cancel contracts. The business owner is also protected against other liquidation threats. There is a reorganization of the business and personal assets and debts. A Chapter 11 filing may be over in a few months or in several years, depending on the complexity of the bankruptcy case.
Which chapter of bankruptcy you chose depends on your individual financial situation. Look into all your options, your financial dilemma may be fixed by debt counseling without the need for bankruptcy. Go to a debt counselor first; get a list of your income and expenses, as well as, your assets. If it is decided that bankruptcy is your only choice, than chose the chapter that suits you best.
Source: http://blog.ebusinessdebtrelief.com/debt/415
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