What You Need to Know about Bankruptcy

Millions of people in the United States struggle with debt and long to be free of the burden of unpaid bills that they simply cannot pay. For some, there is the option of claiming bankruptcy. As defined by the Bing Dictionary, bankruptcy is the “legal inability to pay debts: the state of having been legally declared bankrupt”. When you declare bankruptcy, you are saying that it is impossible to pay off the debt you have. Although claiming bankruptcy can take away the stress and burden of debt, there are negatives to the process as well.  Claiming bankruptcy can clear some debts: credit cards, bills, certain loans. But it does not cover student loans, alimony, or child support. Also, claiming bankruptcy will negatively affect your credit score, and can prevent you from taking out a car loan or a mortgage.

 Bankruptcy is a process in which the individual or the business can eliminate their debts under the protection of the federal court. There are two types of bankruptcy: liquidation and reorganization. Liquidation is a means of converting assets into cash, which will pay off the outstanding debts. Reorganization is the process of organizing outstanding debts and coming up with a payment plan to pay back the debtors. The most common claims for individuals are Chapter 7 and Chapter 13. The following is a list of the different types of bankruptcy, provided by the US Courts website:

 ·    Chapter 7 is Liquidation
 ·    Chapter 9 is Adjustment of debts of a Municipality
 ·    Chapter 11 is Reorganization
 ·    Chapter 12 is Adjustment of debts of a family farmer or fisherman with regular income
 ·    Chapter 13 is Adjustments of debts of an Individual with regular income
 ·    Chapter 15 is Ancillary and Other Cross-Border Cases

 The following are links with more information on bankruptcy.
http://www.nolo.com/legal-encyclopedia/chapter-7-13-bankruptcy-basics-29829.html
http://www.uscourts.gov/FederalCourts/Bankruptcy.aspx

 

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