Going through a bankruptcy is never fun, but it can help those in serious need of financial help. The only problem is that when going through these kinds of proceedings, you may not know what type of bankruptcy is right for you. Not everyone should use a Chapter 7 and Chapter 13 may not provide all the help you need. This is why it is a good idea to know the kinds of bankruptcy and choose the one that best fits your situation.
Bankruptcies You Will Not Use
While there are four types of bankruptcy, it is likely that you will not be using two of the four. The first kind you will not use, but it is good to know about in case you hear about it is Chapter 12. This is a special bankruptcy that is reserved just for farmers and their families. So, unless you are raising vegetables for a living, you will not need to worry about this bankruptcy.
Chapter 11 is a type of bankruptcy that is intended only for use by businesses. It is also known as reorganization because of the way that the debt and money is reallocated. If you are an individual with extremely large amounts of debt, it is possible that this might actually be the bankruptcy that is right for you. However, the number of individuals to use this bankruptcy is very small.
The Bankruptcies You Will Use
In most cases, you will file using Chapter 13. This is the most common because it has the most protection with the least amount of loss. You are offered protection from creditors while repaying the debt. However, when you are filing using Chapter 13, you will not have the ability to discharge very much of your debt. This is also known as a debt adjustment because it requires you to come up with a plan to pay your debts that is based on your current income.
If you are looking to eliminate debt completely, you may want to consider using Chapter 7. This is also known as liquidation or a straight bankruptcy. The main drawback to this kind of bankruptcy is that you are required to give up property that does not meet the exemption requirements. So, if you are planning on keeping anything with a large amount of money still owed on it, this is not the bankruptcy for you.
By understanding these kinds of bankruptcy, you may get a better idea of what kind you are looking for. If you are still confused, you can get a bankruptcy lawyer to answer all your questions and guide you in filing for bankruptcy.