Friday, June 19, 2009

Common types of Bankruptcies:

Let's have a quick run down on the types of Bankruptcies:

Chapter 7: The most common and severe of all the existing types of bankruptcies. The other names for Chapter 7 bankruptcy are "Straight bankruptcy" and "liquidation". This type is particularly preferred by the individuals who have negligible or no property and is under the burden of lot of unsecured debt. Generally, for these cases, the debtor needs to sell most of his non-exempt properties to pay the creditors. The basic idea behind filing Chapter 7 bankruptcy is to pay off your debts. However you cannot keep behind any property like a home or a car in this law.

Chapter 9: This type of bankruptcy is for municipalities and functions much like Chapter 11.

Chapter 11: This bankruptcy law is primarily used by financially struggling businesses to reorganize them, and thus Chapter 11 is also known as "Reorganization". Since this type is complicated and expensive, therefore it is mainly feasible for large corporations or businesses, where they can get out of debt by some repayment plans.

Chapter 12: Chapter 12 bankruptcy law is available for farmers and fishermen. Its function is similar to that of Chapter 13.

Chapter 13: This is another law available for individuals. In this case, your income is the main source to pay your creditors and wipe out the debt over time. The duration of the repayment plan may vary from three to five years but the best part is that you can keep your valuable properties, like a home or a car, while filing a Chapter 13 bankruptcy.

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