The 12 Most Common Bankruptcy Questions
Bad Debt Consolidation by splinder
Filed under Bankruptcy
Debtors facing extreme financial crunch need to know the answers to several key bankruptcy questions before taking the option of filing for bankruptcy. However, the most important question is, ‘Under which ‘code’ of US Law should you file for bankruptcy?’[br]
What are the Categories of Bankruptcy Law?
Under the US Bankruptcy Code, there are specific chapters defining the process. They also have certain provisions that are beneficial to individuals or organizations filing for bankruptcy. These Chapters are:
- Chapter 7, also know as straight bankruptcy, allows individuals or businesses to clear most of their debts by sell their ‘nonexempt’ assets. Best for people who have large unsecured, such as unpaid credit card, medical and utility bills and payday loans, and little income. However, under this Chapter, your assets can be liquidated to payoff their debts.
- Chapter 11, also known as reorganization, is mostly used by businesses that want to continue operations, while repaying its creditors according to a court-approved plan.
- Chapter 12 provides loan relief to family farmers and fishermen who have regular income.
- Chapter 13 is best for individuals with a regular source of income, looking to keep their property while repaying their bills. Under Chapter 13 bankruptcy, you can avoid foreclosure and repay your debts based on the no interest, realistic repayment plan approved by the court. With income, individuals can ensure that the repayment plan is adhered to.
- Chapter 15 replaces Section 304. This was added by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and is designed to deal with cross-border bankruptcy proceedings.[br]
What are the Long-term Effects of Bankruptcy?
The length of a bankruptcy case depends on the type of bankruptcy you have filed. While a case filed under Chapter 7 may be discharged between three and six months, Chapter 13 bankruptcy repayment plans generally take longer than Chapter 7 cases.
Once you have filed for bankruptcy, your credit report will continue to show it for the next seven (Chapter 13 filing) to ten years (Chapter 10). This may mar your ability to get low-interest loans.