Debtor Bankruptcy

When you are in no position to fulfill your repayment obligations, you end up in debt. If you find yourself in this situation and there seems to be no other way out, you can file for debtor bankruptcy. There are six types of debtor bankruptcy. The two that are most common are chapter 7 and chapter 13. Additionally there is chapter 11 which is mostly used by businesses. Under chapter 7, your assets are taken over by a court appointed trustee. Your assets are then liquidated and what is collected is used to pay what is claimed by the creditors. You are only permitted to file for this bankruptcy, just once in eight years.

In chapter 13 bankruptcy, you are required to repay your creditors using a part of your earnings. This is usually a repayment plan that goes on for three to five years. A debtor bankruptcy has the advantage of giving you a fresh start. This completely wipes your slate clean and you are declared debt free. The entire bankruptcy process has become harder with the new laws that expect you to be eligible to qualify for a bankruptcy. Debtors will have to go through a means test. This is necessary so that the court can decide which type suits you best. You will also be required to go for credit counseling before you file.

If you are a business owner, you can qualify for chapter 11 bankruptcy. This permits you to keep your business running while also reorganizing how to repay your creditors. You have to have an agreement with the creditors on how you intend to repay the debt under the court’s jurisdiction.

It is vital to contact a bankruptcy lawyer so that you can understand how the types of bankruptcies work. This can guide you into making a choice, should you decide to file for debtor bankruptcy.

Mercy Maranga writes content on Finance and Debt Management. Visit her site here for more information on Finance and how to effectively Manage your debts. Bankruptcy