There are different options available to you if you have already made the decision to declare bankruptcy. As an individual, you will have a couple of options to choose from when filing your bankruptcy case. These choices involve either having to liquidate your debt or to reorganize them.
Chapter 7 Bankruptcy
When you are applying for a chapter seven bankruptcy, you will have to prove that you have a minimal amount of income and no way to pay off your debts. The laws regarding this type of bankruptcy make it impossible for someone with an income above a certain amount to get the kind of relief that a chapter seven bankruptcy can provide. Once it has been determined that you are eligible for a chapter seven bankruptcy, a trustee will be appointed to go over your finances and determine how your creditors will be paid off. You will most likely have some creditors that will not have to be paid and the court will allow you to discharge those.
If you file for this type of bankruptcy, it will mean that you will no longer be under any obligation to pay off your debts. There are some things the will never be allowed to be discharged, however. Those include your child support payments and alimony as well as your taxes. For businesses that file this type of bankruptcy, the business can no longer exist after the bankruptcy has been filed and ordered.
Debt Reorganization
Reorganizing your debt is generally done if you still have some income that will allow you to pay off some of the amount you owe your creditors. There are a couple of chapters of the bankruptcy code that will allow you to handle this. Chapter eleven is used by businesses or individuals with very large amounts of debt. A chapter thirteen bankruptcy, on the other hand, is used by individuals with a lower amount of debt.
If you have chosen to file this type of bankruptcy, the court will put a stop to any collections that are currently taking place. Usually, you will be given an extra three to five years to pay off your existing debt. The court will allow you to discharge some of your debt but there will always be payments that cannot be discharged. There is also the issue of making sure that the payments are made when they are supposed to. If you do not make your payments on time, the court can decide to liquidize your assets to pay off your debt.
You should also know that your creditors will also have the choice to file bankruptcy against you. This will make sure that your assets are liquidated and distributed among your creditors in the most reasonable manner. The creditors do ensure that they are keeping with the law when they file this type of bankruptcy because there will be a penalty if a creditor files an unfair or improper bankruptcy case against a debtor.
The bankruptcy laws are in place to help a debtor who finds himself unable to get out from underneath their crushing debt. It is important that you exhaust all alternatives before you opt to declare bankruptcy. You should also consult with a lawyer to make certain that you have followed the law precisely so that your bankruptcy case will be approved and your debts will be discharged. Be sure to find a lawyer who is experienced with bankruptcy laws and one that will provide you with the most help.