Get to Know Chapters of Bankruptcy & Their purposes

Since the new century there has been new establishment of bankruptcy laws. These different types offer several ways in how the bankruptcy will work for them, how debts will be cleared|settling the debts and instituting who can file what type of bankruptcy. As the new laws are more comprehensive, not every type of bankruptcy is ideal for everyone and it is important to make sure that you choose the right type of bankruptcy when filing, so you can benefit the most.

In essence, there are 3 most common chapters that cover for most debtors:

Chapter 7 Bankruptcy

Chapter 7 bankruptcy can be filed by individuals or businesses. This type of bankruptcy wipes the debts clean with little or no repayment.

Under this type of bankruptcy one will see that he can have some properties exempted from selling and everything not exempted is sold to pay debts.

Once the bankruptcy is approved the persons debts filed under the bankruptcy are cleared.

Chapter 11 Bankruptcy

Chapter 11 bankruptcy can be filed by businesses and individuals. However, this chapter is more skewed to businesses, though.

This type of bankruptcy is best for those with assets. This chapter is some sort of a repayment plan so that a business can repay the debts while keeping their properties.

Usually this is filed by a business because during the bankruptcy process the business can still remain operational.

Chapter 13 Bankruptcy

Chapter 13 is another repayment plan for individuals only. Under this chapter a person get to keep their properties while repaying their debts and keeping away from common collection methods.

The bankruptcy laws protect a person or business from the harassment of the creditors. Once bankruptcy is filed creditors must stop all collection processes. They can not file court charges or claims. They can not continue to send letters or call a debtor. They can not do anything outside of the bankruptcy proceedings.

The choice of what type of bankruptcy to file is really based upon your own situation. Always look at your assets and debts carefully before you decide. Ultimately you should be concerned with the best way to remove your financial problems while at the same time not losing too much of your possesions. In order to best do this you need to look at what property you own that is exempt and if you have any property that is not exempt.

Bankruptcy should not be considered as an avenue to escape from debt. It is intended to be a way to help you get back on track. It is wrong to just opt for Chapter 7 because debts are completely eliminated. The revised laws have imposed restrictions that prevents many debtors from filing Chapter 7 when they can afford to repay debts.