Knowing the bankruptcy facts becomes essential when you start sensing that your debts are out of control and you are unable to make payments on the time.
Bankruptcy allows you to declare your incapable of making payments of the debts that you owe, in effect, freeing yourself of many of the debts in a lawful manner.
"The man who never has money enough to pay his debts
has too much of something else."
- James H. Aughey |
The basic idea behind the concept of bankruptcy is that an honest debtor can get a fresh start in his life. It provides you relief from most outstanding debts. You can pay the amount you owe to the lenders depending on how much money you have with you, and your ability to earn money in the future.
It is difficult, yet available means to get you out of your debt trap so you can make a fresh start, hopefully never to return to your old spending behaviors.
Types Of bankruptcies
However, before you take the final decision regarding filing for bankruptcy, you should learn bankruptcy facts and figures. There are various types of bankruptcies and each has certain requirements and consequences.
Major types of bankruptcy filings include Chapter 7, Chapter 11, Chapter 12 and Chapter 13.
The amount of debt outstanding, the kind of debt along with whether you are filing in the capacity of an individual or a business are key factors that decide which of these categories you fall under.
Chapter 7
In most of the cases the bankruptcy filed falls under the Chapter 7 category. Another name to this kind of bankruptcy is personal bankruptcy.
When you file for this type of bankruptcy you can do away with the majority of your unsecured loans. The loans that you have borrowed without offering any kind of security are known as unsecured loans.
Credit cards are just an example of this kind of loan. If you are well informed about these bankruptcy facts then you are in a better position to decide whether or not to file for bankruptcy.
After filing for bankruptcy under this category you get a legal kind of stay, or waiver, and lenders cannot make any efforts to recover money from you.
A trustee becomes the custodian of assets like your home and vehicles – and oversees the liquidation of those assets. The money received from this process is used for settling the loan amount with the creditors.
Usually, this process takes six months time to complete.
Chapter 11
Bankruptcy facts for this type of filing is a bit different. If you are running a business and do not wish to lose any of your assets then you can choose to file a Chapter 11 type of bankruptcy.
It is a sort of reorganization and the process is very complex. You should hire the services of a veteran bankruptcy attorney for this purpose.
Chapter 12 And 13
As a farmer you can opt for Chapter 12 type of bankruptcy so the assets remain with you and the amount is paid over a definite period of time.
Chapter 13 is akin to the Chapter 12 type of bankruptcy. It allows you to maintain even those assets that you have to clear up in Chapter 7 type of bankruptcy.
Now that you have the basic bankruptcy facts in hand, let’s think about a better option. Keep in mind that bankruptcy is the last resort and there are other alternatives like finding ways of earning additional income and cutting off the expenses that made you cash strapped in the first place.
"Creditors have better memories than debtors;
and creditors are a superstitious sect,
great observers of set days and times."
- Benjamin Franklin |
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Debt is NOT your friend. It's not a wonderful "tool" for building wealth. That's a myth.
