An Introduction to Bankruptcy Law and The Most Common Types of Bankruptcy
Before going into the specifics of bankruptcy law it might be wise to first define it in as simple of terms as possible. First off, bankruptcy is when an individual or organization legally declares their inability pay off their creditor(s). Bankruptcy law provides the option for the debtor to pay off his or her debts by dividing his or her assets among his or her creditors.
It seems that whenever someone claims to have or be in the process of filing a “bankruptcy” it is looked upon as a bad thing but that is not necessarily the case. Sure, circumstances likely aren’t ideal if you have to file for bankruptcy but bankruptcy law exists to give those with suffocating debts a fresh start.
Bankruptcy Law: Working for You
Bankruptcy law is not meant to punish you for not being able to pay off your debts but rather to provide you with a second chance. In fact, some situations may allow you to discharge certain debts after your assets have been divided even if those debts have not been paid off. You may even be allowed to stay in business and use that income to help pay off your creditors.
Because bankruptcy law can be complicated and tricky to grasp a hold of for many people, it is strongly recommended that you consult a licensed bankruptcy attorney before taking action. The counsel of an expert could make all the difference in filing a successful and efficient bankruptcy and muddling up your financial situation even further.
Common Types of Bankruptcy Filings
• Chapter 7 bankruptcy. Otherwise known as “liquidation” or “straight bankruptcy,” Chapter 7 is the most common form of bankruptcy and allows the individual to siphon off all assets in order to pay off their creditors. You may be able to exempt certain items, such as your home, from being divided amongst your creditors. Once all your assets have been liquidated and distributed, the debtor is thereby freed from all further obligations.
• Chapter 13 bankruptcy. The other most common form of bankruptcy, Chapter 13 results in a repayment plan where the individual pays off their debts over the course of no more than five years. In order to be eligible for Chapter 13, however, the bankruptcy court will decide whether or not you are eligible depending on your income and its relation to the median income of your state.
Learn More About Bankruptcy Law
You probably want to know more about bankruptcy law, especially if you plan on filing for bankruptcy in the near future. So talk to a licensed bankruptcy attorney today to have all your most pertinent questions regarding bankruptcy and bankruptcy law answered.
