Under United States law, there are three primary categories of bankruptcy. Chapter seven, Chapter eleven, and Chapter thirteen (the term """"Chapter"""" is derived from each applicable section of the U.S. bankruptcy law code). Each is unique, so you may need to determine which one is ideal for your situation. However, as Chapter eleven pertains primarily to business interests and is significantly more complicated, we will examine the other two.
How, then, does Chapter 7 bankruptcy function? To determine your eligibility for this form of bankruptcy, you must pass a test known as a suggests that test. If you are able to proceed, a trustee can determine how your assets will be sold and distributed among your creditors.
You must be aware, however, that certain assets are exempt from this liquidation. This means that you will be able to retain some of your belongings, so you do not need to worry about losing everything. Once completed, your debt is discharged, allowing you to start over...sort of (more on this shortly).
Chapter thirteen is distinct in that it reorganizes your debt by establishing a manageable repayment plan over a number of years. In most cases, you may be able to keep all of your property rather than selling a portion of it to repay creditors. Additionally, there are some debts that will be discharged under Chapter 13 that will also be discharged under Chapter 7.
Previously, we discussed the concept of a modern beginning, but stated that it was """"sort of"""" modern. After paying off your debts, you will experience a sense of liberation, but you are not quite back to square one. This can remain on your credit report for a full decade after a bankruptcy. Your credit is probably as good as it can be, so this may not be significant in the grand scheme of things.
The clock begins to run based on when you file, not when you finish making payments. Therefore, it makes sense to declare bankruptcy as you will be able to eliminate your debt. The quicker you submit, the quicker your credit will recover.
You presently have answers to the question """"how does bankruptcy work?"""" It may not be a pleasurable action to take, but there is solace in not being harassed by bill collectors and not having to worry about what could happen next. Despite what some """"consultants"""" may say, filing for bankruptcy may be your best option.
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