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How To File With Each Type Of Bankruptcy!

By: Chris Safin

For individuals there are two types of bankruptcy including Chapter 7 in which all of their debts are essentially eliminated and Chapter 13, in which their debts are paid off over a 5 year period of time, supervised by a trustee from your court.

Businesses can use a Chapter 11 bankruptcy during which they can reorganize their debt until it's paid off or renegotiated in order to remain in business until their financial house is back in order.

A quick consultation with a bankruptcy attorney will help determine which of the types of bankruptcy the individual qualifies to file under. There are certain tests administered to determine if the individual qualifies to file Chapter 7 under the new bankruptcy laws.

The main part of the test for an individual will consist of an income calculation to find out whether or not the individual has a monthly income that is higher than the state average, if he or she does the individual would then have to file under chapter 13 and would not be allowed access to chapter 7.

In Chapter 7 bankruptcy, all debts, including secured and unsecured can be discharged. However, some assets owned by the individual may be confiscated and sold by the court in order to satisfy a portion of the secured debt.

Of the two types of bankruptcy, Chapter 7 offers the most financial relief for the creditor.

Paying your debts off over time

If the individual has to file for chapter 13 instead of chapter 7 they will be required to send monthly payments to a court trustee, the court trustee will then send out payments to any creditor who is listed as part of the payment plan.

Chapter 13 will allow the individual to honor their financial obligations and at the same time stop creditors from demanding collection actions against the debtor.

Not too long ago it was not uncommon for people to start out with a chapter 13 bankruptcy, but soon after find themselves incapable of meeting with the obligations and so were able to make the move into a chapter 7 bankruptcy instead.

However since the new bankruptcy laws came into circulation, the question of whether or not you can qualify for chapter 7 of 13 bankruptcy is decided by the courts means test.

If the person has the means, current income level, to pay off their debts, they are restricted to filing for Chapter 13 whether they like it or not.

Whether you file for chapter 7 or 13, any assets or initial payments will first go to creditors with priority access. Priority access will be granted to but not limited to, student loans, part income taxes and generally most other government obligations you may have.

As soon as all of your creditors that have qualified for priority access have had all debt paid, the paying of all your unsecured creditors will then start to take place.

It is really, really vital to remember that what ever you do, what ever bankruptcy you can file for, bankruptcy really must be your last option. Once you've filed bankruptcy there is no turning back and it will remain on your public records for as long as 10 years.

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