When most people think of bankruptcy, they think of only one kind – typically Chapter 7 bankruptcy. However, it is important to understand that there are multiple types of bankruptcy – each with their own function and form. Bankruptcy – as a general concept -is a last-ditch effort to save yourself from mounting debt and the process entails liquidating assets to pay back loans. That new car you just bought? – You may have to resell it and use the money to pay back lenders. The same goes for any other assets you may own. Once the bankruptcy proceedings are done, you can start rebuilding your financial life. Here are some different types of bankruptcy.
The most common type of bankruptcy is Chapter 7, which mostly protects individuals from insurmountable debt. Most of the time, people choose this type of bankruptcy because it protects some of your assets. If you have a home, you can waive a protection right to keep your home. A judge may or may not approve this waiver, but it is usually granted to people who have families or dependents. So, if you have credit card debts mounting or even mortgage rates mounting, you may want to file for this type of bankruptcy.
Another type of bankruptcy that is filed is Chapter 11. This type of bankruptcy is mostly reserved for businesses that have debt building up. However, individuals can also file for this type of bankruptcy. If you are a business owner and your debts have reached a point where they are impeding the growth of your business, you may be able to file for this type of bankruptcy to make your debts more manageable. You may have to downsize your business and sell off some equipment, but at least you will be able to keep your business.
Next, you may want to file for Chapter 13 bankruptcy, which is a more lenient form of debt repayment and restructuring. Basically, if you are late on your mortgage or even car payments, you will be able to file for this type of bankruptcy. Not only will it allow you to restructure your debts, but it will also be a way for you to pay your debts over the course of a five-year time period. This form of bankruptcy is a great option for those individuals that have assets they want to protect, like homes, cars, and businesses.
Lastly, it is important to understand all the varieties of bankruptcy, because not all debt is the same. Each person has their own share of financial burdens – these burdens not only include the debt they owe, but also the fear of losing assets. Not only that, but you want to know the different forms of debt restructuring because it will allow you to discuss with a specialized bankruptcy law firm – all of your available options. In the end, some people live beyond their means and other people sign up for bad investments – anything can happen – but it is important to know that there is always a way out if the pressure becomes too much to handle.