Why File Bankruptcy?
Filing bankruptcy may help some consumers and businesses eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. The two types of bankruptcy typically include liquidation and reorganization.
Filing bankruptcy may be a necessary step for individuals or businesses with unmanageable debt and/or factors affecting their source of income.
How Can Filing Bankruptcy Help?
Filing bankruptcy may help debtors in a number of ways depending upon which chapter of bankruptcy is filed. Chapter 7 and Chapter 13 bankruptcy are typically the most common chapter of bankruptcy filed.
These chapters of bankruptcy may assist an individual or business by:
- – May help individuals or businesses have utilities turned back on after a disconnection
- – Ending collection calls and debt collection harassment from creditors
- – Potentially eliminating debt through a discharge of debt
- – May help avoid or delay the foreclosure process
- – May help end wage garnishments
Chapters of Bankruptcy
There are six different chapters of bankruptcy an individual or business may choose from depending upon their specific financial situation. The various chapters of bankruptcy include Chapter 7, Chapter 9, Chapter 11, Chapter 12, Chapter 13, and Chapter 15.
Chapter 7 vs. Chapter 13 Bankruptcy
Chapter 7 bankruptcy is typically the most common chapter of bankruptcy filed in the United States and may be filed by individuals or businesses.
Chapter 7 bankruptcy is considered a liquidation bankruptcy, since nonexempt assets are sold to repay creditors. Chapter 7 bankruptcy offers the benefit of potentially eliminating certain types of unsecured debt. This may be a smart choice for debtors who have little to no money left over after paying basic living expenses each month.
Chapter 13 bankruptcy is the next most common chapter of bankruptcy filed in the United States and may be filed only by individuals.
Chapter 13 bankruptcy is considered a reorganization bankruptcy, since debts may be restructured to allow for more affordable monthly payments. This chapter of bankruptcy may help individuals protect assets through the bankruptcy process. This may be a smart choice for debtors who have some form of disposable income after paying their basic living expenses each month.