If you have more debt than you can reasonably afford to pay, you need to make sure that you find a way to pay it or get rid of your debit. Oftentimes, the best way to get rid of your debit is through bankruptcy in order to start over. There are actually four different types of bankruptcy: Chapter 7, Chapter 13, Chapter 11 and Chapter 12.
Chapter 7 is one of the most common types of bankruptcy. With Chapter 7 bankruptcy, all of your debt is reorganized. A plan is made that allows you to pay back your creditors over a set period of time. You have to make a certain amount of income in order to qualify for Chapter 7 bankruptcy.
With Chapter 7 bankruptcy, you do not lose your home or your property. Instead, you are put on a specific plan to pay back your creditors with reasonable monthly payments. Your creditors can't harass you if you stick to your plan. This process can take years but will get you back on the right course.
Chapter 13 is another common type of bankruptcy. With chapter 13 bankruptcy, you have to meet certain criteria. You are only allowed to keep certain assets. For example, you would be allowed to keep a car for getting around, but you would be required to sell your second truck and motorcycle to settle your debts as those forms of transportation are not necessary. You are able to keep a lot of your assets but may have to sell some of them off.
With Chapter 13 bankruptcy, everything is wrapped together. You will have to use your resources to pay off a certain percentage of your debts, and the rest will be discharged. Once the debits are discharged, credits have to leave you alone.
Chapter 11 bankruptcy is typically used by businesses. Individuals can file for Chapter 11 bankruptcy as long as they have not had another bankruptcy petition denied in the past few months.
Chapter 11 bankruptcy is usually used to reorganize the debt and structure of businesses.
Chapter 12 bankruptcy is a newer class of bankruptcy. It is specifically designed for individuals who run family fishing or farming operations. It was created to help farmers reorganize their finances, similar to how Chapter 11 allows businesses to restructure their debt. It allows family-sized farming and fishing operations to reorganize their debit in order to not face foreclosure or liquidation on their farming operations.
If you have debt, talk to a bankruptcy filing lawyer and financial planner about what type of bankruptcy works best for you.