Posted on: 25 September 2015Share
If you are considering personal bankruptcy, then there are a few things that you should know before proceeding.
First of all, what are your options?
The two main types of bankruptcy available to you are known as Chapter 7 and Chapter 13 bankruptcy. The other chapters tend to apply to more unique situations or to businesses.
So what is Chapter 7?
Chapter 7 is also known as liquidation, which should give you some idea of how the process works. Basically, your debts will be partially repaid by liquidating a large portion of your assets. When you apply for Chapter 7, the court will appoint a trustee to oversee your case. The job of this trustee is to take an inventory of all of your assets and to arrange a meeting between creditors and debtor. At this meeting, the specifics of the situation will be discussed. Liquidation does not include business assets, except in the unique situation in which you are the sole proprietor of a business.
Once the trustee has taken inventory of your assets, they are to liquidate all of the non-exempt assets. Exempt assets include some assets that are required for daily life, such as a car and a small amount of money. After the proceeds from the liquidation are given to the creditors, you will have been freed from most of your debts. However, some debts (such as student loans) can persist through Chapter 7's.
In general, you can expect a Chapter 7 to take several months. After the filing ends, the bankruptcy will stay on your credit report for about 10 years.
Then what is Chapter 13?
While Chapter 7 revolves around the sale of your assets to remove your debts, Chapter 13 is a more long-term plan that seeks to repay your debts through a structured series of payments. Like in Chapter 7, a trustee will be appointed to oversee your case. This trustee will organize a meeting between the debtor and creditors, where the specifics of the repayment will be arranged. Depending on the circumstances and the means of the debtor, repayment might be scheduled to take anywhere from 3 to 5 years.
You will pay money to your trustee on a regular basis. The trustee will then distribute that money to your creditors. In the end, a Chapter 13 will stay on your credit report for less time than a Chapter 7, that is, about 7 years.
For more information, contact a bankruptcy attorney like Spear & Blackburn PSC Atty.