Understanding the Different Forms of Bankruptcy
For Jessica, being unable to pay her creditors has caused her a lot of stress. Fortunately for her is that, with the assets she has available, she can do this.
By filing for bankruptcy, she can pay her creditors off within six months. Filing for Chapter 7 bankruptcy in her case, means that she can get a new start quickly. This should be taken into consideration as an absolute last resort.
This is a legal procedure that enables individuals or companies to pay their creditors off. Depending on their level of income and the assets they have, they can settle what they owe within 6 months, or over a period of three to five years.
More about the different forms of bankruptcy:
Chapter 7 bankruptcy is the most common type used to pay unsecured debts off.
A trustee may liquidate Jessica’s possessions and give the money made to her creditors. To qualify for this, a means test must be passed.
Not available to high income individuals, it remains on your credit report for seven years.
Chapter 11 is about restructuring of finances, while ensuring that property and assets are protected. Quite costly and time-consuming, this is for when businesses are in too much debt.
It can be filed voluntarily or credit providers can file on your behalf. Lenders must agree to your repayment strategy however. A benefit is that property won’t be liquidated and it protects you from lawsuits.
A Chapter 13 filing process is much longer than a Chapter 7 filing, but means that you won’t lose any of your assets. You’re also protected from collectors for the duration of the repayment period, which lasts 3 to 5 years.
Chapter 12 bankruptcy is a more recent form, introduced in 1986 for family farmers and fishermen with a regular income. It has been designed to protect businesses that are financially vulnerable to severe weather and fluctuating commodity prices.