Are you suffering from excessive debt burden? Do you find it troublesome to make the debt payments? If this is your situation, then choosing bankruptcy could be a suitable option for you. With the help of bankruptcy, you can get relief from the enormous debt problems either partially or completely. However, you need to know that when you file for bankruptcy, it will remain on your credit report for 7 to 10 years. As such, bankruptcy hurts your credit score to a great extent. There are different types of bankruptcy methods including Chapter 7, Chapter 11, Chapter 12, and Chapter 13. Read on to learn more about them:
- Chapter 7 – A Chapter 7 bankruptcy is the most common type of bankruptcy that is filed by the consumers. All your assets get liquidated and your outstanding debts are wiped out completely. Chapter 7 bankruptcy pardons the debtors who have a financial crisis such as credit card bill and medical debt. By filing Chapter 7 bankruptcy, you will be able to eradicate credit card dues or medical bills. This kind of bankruptcy is available for the individuals, couples, business partners and corporations. When you file for Chapter 7 bankruptcy, it stays on your credit report for 10 years.
- Chapter 11 – With the help of Chapter 11 bankruptcy, business owners get a suitable opportunity to reorganize their debts. The debtor’s claims of creditors are either paid partially or completely by the debtor. The reason for reorganizing the debt is to restructure them so that the debtor can function better with the debts. However, you cannot file for Chapter 11 bankruptcy if a petition was discharged in the last 180 days. Besides this, a bankruptcy petition cannot be filed unless the debtor has acquired credit counseling from an approved credit counseling agency in the previous 180 days.
- Chapter 12 – Chapter 12 bankruptcy was designed particularly for the reorganization of family farms. More than 50% of your income must be derived from farming or fishing in order to qualify for this kind of bankruptcy. Chapter 12 is only available to the individuals whose debts meet specific debt restrictions. A family farmer may either be an individual, a corporation or a partner.
- Chapter 13 – A Chapter 13 bankruptcy is a debt repayment plan that is available to individuals and married couples who have debts that fall within a definite statutory amount. Chapter 13 bankruptcy enables the debtors to pay off either some or all of their debts from their income over a period of 3 to 5 years. When you file for Chapter 13 bankruptcy, it will remain on your credit report for 7 years.
Thus, these are the different kinds of bankruptcy that you need to be aware of when you decide to file. It is always best to consult with an experienced bankruptcy attorney before proceeding with any type of bankruptcy.
This is a guest post by Andrew who writes for financial communities.