There are three common bankruptcy chapters that are frequently discussed. They are Chapters 7, 11 and 13, respectively. If you file for bankruptcy, it is almost certain that one of these three chapters will apply. It is difficult to determine which chapter is ideal for you without careful analysis, as your choice depends on numerous complex legal and financial considerations. But before you reach for the calculator, it's essential that you have a fundamental comprehension of each chapter's purpose, their consequences, and their differences.
Chapter 7 is the most common form of bankruptcy and is frequently referred to as a liquidation bankruptcy. In Chapter 7 bankruptcy, you'll be able to discharge all of your eligible debts. Certain debts, such as student loans, child support, and some tax obligations, are non-dischargeable, which means that you will still owe these debts after the bankruptcy is discharged.
Chapter 7 bankruptcy is known as a liquidation bankruptcy due to the manner in which your assets are handled. Yes, sadly they are being liquidated. All non-exempt assets are sold at auction, and the proceeds are distributed to your creditors. Each state has its own rules and procedures regarding which assets you can exempt or keep out of the bankruptcy trustee's hands. This is illustrated by Florida's residential exemption. In Florida, your primary residence, or homestead, is exempt from a Chapter 7 bankruptcy; therefore, the trustee will not seize and liquidate it. In reality, many Chapter 7 bankruptcies are asset-free once all property exemptions have been applied.
Chapter 13 is the second most prevalent type of bankruptcy. This type of bankruptcy is commonly known as a repayment or reorganization bankruptcy. When a person files for bankruptcy under this chapter, their attorney will evaluate their current financial situation and devise a repayment plan for their debts that spans three to five years. The monthly payments will be made to the bankruptcy trustee and distributed in proportion to the creditors' priority status.
Calculating the periodic payments is a complicated process. You must examine your current income and any anticipated income, then deduct reasonable and ordinary expenses such as rent, electricity, and food costs, among others. At this point, you will have what is known as disposable income, which will be used to pay creditors according to the preferred payment order. In many Chapter 13 bankruptcies, your unsecured creditors will be required to accept a total payment amount that is less than the current debt balance.
Chapter 11 bankruptcy is the other common form of bankruptcy. This is very similar to Chapter 13, but is primarily used by businesses. Due to the recent economic downturn, numerous businesses have sought protection and debt reorganization under this chapter of the bankruptcy code. General Motors and Blockbuster Video are two of the most well-known.
You should have a better comprehension of bankruptcy and the path you're taking now that you've been introduced to the most common bankruptcy chapters. Don't fret if you feel overwhelmed by information; that's perfectly normal. Bankruptcy is a complicated legal procedure that is difficult to fully comprehend. There are an abundance of attorneys and financial advisors available to assist you.""
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