Types of Bankruptcy
It is important for people to determine the type of bankruptcy that they need to file according to their current financial situation. They can have a systematic and successful bankruptcy case when they are aware of the requirements and procedure for the particular case that they plan to file.
Chapter 7 Bankruptcy
This involves the total liquidation of the non-exempt assets or business properties of an individual. The amount accumulated from the liquidated assets is used to pay the lenders or creditors that have a claim against the client filing for a bankruptcy case. However, some people may not be eligible for this type of bankruptcy. An individual who filed for Chapter 7 bankruptcy case in the last 180 days, and was rejected by the federal court, is ineligible for another application. Moreover, those who withdrew their previous Chapter 7 bankruptcy application may not reapply within a certain period of time.
Chapter 11 Bankruptcy
Chapter 11 bankruptcy allows individuals to reorganize their debts and payment terms, so they can settle their debts. Those who file for bankruptcy are afraid of losing their assets, and they decide to apply for Chapter 11 bankruptcy with the hopes of retaining some of their assets.
This is a brilliant option for business owners who want to continue their trade while the repayment plan has been confirmed. They can still keep their possessions and assets until there is a final agreement of the reorganization plan. In some cases, clients end up converting the case to Chapter 7 bankruptcy, so they can pay their creditors.
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Chapter 13 Bankruptcy
Individuals who file for bankruptcy that is under Chapter 13 will certainly have more advantages if they have assets. For instance, debtors who apply for Chapter 13 bankruptcy can have a chance to save a personal asset such as a family home. They are still required to meet repayment schedules for their mortgages; however, the large amount of payment may be rescheduled. They need to repay the total amounts over a period of time that was stipulated in the agreement. Eligible applicants for Chapter 13 bankruptcy are those who have secured and unsecured debts with total amounts that comply with the court’s requirements.
Tips for Debtors Wanting to File for Bankruptcy
Some people realize that filing for bankruptcy is the best option that can help them with their financial situation. When they decide to apply for a particular bankruptcy case, they should remember and apply the following tips that would guide them in the application process.
- Obtain a credit report.
Individuals should visit the Annual Credit Report website, so they could obtain a copy of their credit reports. The three major agencies for credit reporting include TransUnion, Equifax, and Experian, and these agencies sponsor the service. The report is an important part of the debtor’s bankruptcy paperwork, so the lawyer can analyze the debt obligations of the client. A consolidated credit report is often the easiest to read and contains all the information from all three credit bureaus in one report.
- Gain information from the U.S Courts website.
Applicants should determine the type of bankruptcy they need to file, and they could gain extensive information from the bankruptcy basics section of the U.S courts website. They can also learn about the total fees that they need to prepare, as the fees will be collected at the time of filing. For instance, Chapter 7 requires debtors to pay a filing fee of $306. Chapter 11 bankruptcy filing fee is $1046, while Chapter 13 is the cheapest, which is $281. These amounts are based on the U.S courts website, and these were the applicable fees as of November 2011.
- Work with a bankruptcy attorney.
Some debtors refuse to consult or hire a bankruptcy lawyer because of the fees allotted for a legal adviser. However, a lawyer can provide outstanding advice and support to debtors because of the professional’s experience and expertise in filing for bankruptcy cases. Those who seek assistance from a lawyer can avoid making mistakes that can affect the application process.
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Debtors who need to file for bankruptcy should consider several factors and requirements that would ensure the success of their case. They could obtain helpful information when they consult the right agency or professionals when it comes to bankruptcy concerns.