If you feel your debts are out of control, you might be considering bankruptcy. Before decided on that, educate yourself on the different categories of bankruptcy and what happens after you file. There are categories for bankruptcy: Chapter 7, 11, 12 and 13. Which category you fall under will depend upon how much debt you have, the type of debt and whether you are filing for a business or individual. Chapter 7 bankruptcy is the most commonly filed form. Also called personal bankruptcy, Chapter 7 will eliminate almost all of your unsecured debts. Unsecured debts are those such as credit cards, or loans without collateral. When you file, the companies that you owe the money to can no longer attempt to collect funds from you. Any assets that you have, such as homes or vehicles will be turned over to a trustee. These items will be liquidated and the funds will be used as part of the settlement with the creditors. Different states have different exemptions on what type of assets can be liquidated. Chapter 7 will take approximately six months from start to finish. Chapter 7 may only be filed for once every 6 years. Chapter 11 bankruptcy is most commonly used by businesses who wish to keep all their assets. Debts are paid over time, unlike Chapter 7. It is a type of restructuring bankruptcy and can be fairly complicated. It is best to file for this type of bankruptcy with an experienced attorney. Chapter 12 is a specific bankruptcy for farmers. It allows the farmers to keep their assets and repay their creditors over time. It is similar to Chapter 13. Chapter 13 bankruptcy will let you keep those assets which would be liquidated under Chapter 7, such as vehicles or a home. This is a reorganization of your debts. Payments are worked out with the creditors to allow you to pay back your debts over a period of several years (up to 5). There are limits to how much debt you can actually have to qualify for Chapter 13, so check with your state's guidelines. A trustee will be appointed to you to oversee your bankruptcy. Payments are made to the trustee, who disburses the payments to your creditors. If you default on payments, or find yourself unable to make payments, you do have a choice to change to a Chapter 7 bankruptcy. At anytime during your bankruptcy proceedings, if you feel you can get back on track - you can ask that your bankruptcy be dismissed. As long as the bankruptcy hasn't been discharged. When you file for bankruptcy, your credit score will sink rapidly. Although, if you have been having trouble keeping up with your bills, it probably was low already. Bankruptcies can stay on your credit report for up to 10 years after they have been discharged. The good news is, your credit score will start to rise as soon as a discharge has been issued, if you are timely with your payments. You can file for bankruptcy on your own, particularly with Chapter 7, which is the least expensive option. However, dealing with an experienced attorney can help the process move along faster and they can advise you on the best type of bankruptcy to file for. |
