Learn More About Chapter13 Bankruptcy Laws
There are two main types of bankruptcy that consumers may file: Chapter 7 and Chapter 13. In Chapter 7 bankruptcy, a person’s non-exempt property (this varies from state to state) is liquidated to pay back debts. Even if a liquidation does not generate enough money to pay back all of your debts, whatever unsecured debts (e.g., credit cards) that remain after liquidation are forgiven. The slate is wiped clean.
Chapter 13 is designed for individuals with regular income who want to pay their debts, but need some time to do so. To be eligible for this type of bankruptcy, you must have a steady source of income from which you can make monthly payments to your creditors for the next 3-5 years. How much you have to pay back and what your monthly payments will be are determined by the bankruptcy court and based on things like how much money you owe, how much money your creditors would have received had you filed Chapter 7 bankruptcy, and how much you can afford to pay per month.
You may want to consider bankruptcy if you are unable to pay the minimum monthly payment on your debt every month, are receiving harassing and threatening phone calls from bill collectors, have recently lost a stream of income, have been diagnosed with a serious illness, or are experiencing some other family emergency that has overwhelmed you with debt that you cannot handle. When you are feeling overwhelmed by debt, it is usually a good idea to consult an attorney to discuss the debt relief options that may be available to you.
A financial reorganization allows the debtor forgiveness of some of the debt while mandating a scheduled plan of repayment for the remainder of the debt. The Bankruptcy Code allows both consumer debtors and corporate debtors to file a petition seeking financial reorganization. Debt reorganization filings, such as Chapter 13 filings, have several benefits over a Chapter 7 filings. During this period of repayment, the bankruptcy proceeding remains open and it is often difficult for the debtor to get a credit card or even open a checking account. Unlike a Chapter 7 filing, is that the debtor is required to follow a rigid repayment schedule making payments on both unsecured and secured debt for years to come are the draw back of a Chapter 13 filing.
Stockholder interests must also be addressed by a business filing a Chapter 11. The plan may ask the court to restructure the stockholders’ interests and modifying the company’s obligation of payment on a stockholders secured and unsecured debts. When a human being selects this type of bankruptcy filing he or she files a Chapter 13 petition with the Bankruptcy Court. When a corporation of business entity selects this type of bankruptcy filing it files a Chapter 11 petition with the Bankruptcy Court. A business’ Chapter 11 filing differs from a Chapter 13 filed by an actual person in that the business’ reorganization proposal may call for both payments from sales of some business assets and payments using future business income.