Wednesday, March 28, 2018

Two types of personal bankruptcy and four types of corporate bankruptcy

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Bankruptcy can be defined as a legal process that helps a debtor or business to restart finances by paying off debt or liberating from debt. After successful completion of the bankruptcy proceedings, the debtor or business will be exempted from debt. This article discusses different types of bankruptcy, and different business and personal banking sections.

Types of personal bankruptcy

If you have a large number of multiple debts, and all of your attempts to repay the debt have failed, you can submit Chapter 7 or Chapter 13. The two bankruptcy types are given below.

o Chapter 7

If you file Chapter 7 bankruptcy, you may be liberated from some or all of your debt. However, you need to pass the economic situation test because it is the first criterion you need to meet in order to submit Chapter 7. Means test to determine that the debtor's income is lower than middle income (for his/her family size) in his/her state. After submitting Chapter 7, your assets will be liquidated to repay your debt.

o Chapter 13

You should have a fixed income to submit Chapter 13. By submitting Chapter 13, you can repay part or all of your debt with the 3-5 year repayment plan. You can choose Chapter 7 when you have a debt repayment (such as a car loan). If you want to keep your assets, this is a better choice.

Types of corporate bankruptcy

The following discusses different chapters of commercial banks.

o Chapter 7

When an enterprise submits Chapter 7, commercial assets are liquidated. The entire procedure is supervised by the trustee appointed by the bankruptcy court.

o Chapter 9

A municipality may submit Chapter 9 when repaying large amounts of debt. When it submitted Chapter 9, the bankruptcy court helped the city restructure its debt and protect creditors.

o Chapter 11

Chapter 11 helps businesses continue their operations and repays their debts under the guidance of a bankruptcy court. However, only large companies can accept the help of Chapter 11 because it is very expensive.

o Chapter 13

Companies can submit Chapter 13 when protecting their assets. This applies to sole proprietors or small businesses that can retain non-exempt assets and repay the creditors with the help of the repayment plan.

When you have no other choice to pay your debt, you'd better contact the bankruptcy lawyer. Depending on the financial situation, a lawyer can help you choose the most suitable one of the different chapter/bankruptcy types.

With the help of bankruptcy lawyers, you first need to submit a petition to the court, which includes a list of your creditors and how much money you or your company owe them. The trustee then appoints the bankruptcy court after approving your petition. The trustee is responsible for managing the entire process until you repay or pay off your debt.


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