What is bankruptcy?
Banked is a process where a person legally declares himself or his business that unable to pay out of outstanding debts. Depending on the type of type, one encounters a judge to determine the plan of payments, or let the legal bankruptcy release most, not all debts. Businesses can also declare bankruptcy, which either means that the company will close, or that the company will continue to operate with reduced payments to debtors. Each country has its own designation, but this explanation will focus on the most common types in the US.
bankruptcy for individuals or married or domestic partner couple comes in three forms called "chapters". Chapter 7 is the most common form filed by spouses or individuals. Chapter 12 is limited to people who are family farmers or a fisherman. Individuals or marital couples can also submit chapter 13, but it is rare. In addition, chapter 15 could do business, which includes the clearing of international debts. If a state agency like a city must indicateT bankruptcy, chapter 9, which is also called municipal bankruptcy.
Chapter 7 tends to be used by individuals or businesses who want a total clean slate. As a result, it has a company that enters Chapter 7, closing behind its door. For individuals, this type means that the courts declare that one cannot pay for the debt, and almost all debts are invalid. Some federal debts, such as student loans, are not affected by bankruptcy statement.
One must generally be able to prove that a person's income is not enough to meet debts. The person who gives Chapter 7 risks the loss of the most assets with this type of bankruptcy. One does not lose a primary vehicle or residence within this form unless a person has an automatic loan and cannot make payments for a vehicle or a loan for a housing for which he cannot pay.
All assets must be announced foralso the submission of chapter 7. Other assets, such as second houses, collector items and other vehicles, are liquidated for debt payment. Most who give Chapter 7 do that because there are very little left. Once the judge approves the filing, virtually all debts such as those owned by credit cards and doctors or hospitals are cleaned and the person gets a clean slate.
Chapter 13 of bankruptcies gives individuals who own a large amount of assets or assets, but find that their income cannot cover exorbitant payments from owed debts. In this form, the debt is restructured and in some cases decreased so that people retain their assets, but have adequate payments that can make debtors. Generally, payments ordered by the court must be made in time and regularly to prevent the seizure of assets.
businesses describe a similar form called Chapter 11. Some or part of the debt of business can be cleaned and payment plans are restructured.Chapter 11 has the purpose of reorganizing the debt so that the company can continue to operate.
All forms are a costly means to obtain debt relief. Individuals and businesses suffer from a reduction in their credit score after bankruptcy. Individual bankruptcy remains on the credit report for 10 years, which can be approved for new cars, houses or credit cards expensive and difficult.