Types of bankruptcy:
One might have heard the words Chapter 7 or Chapter 11 but, what are they? These are actually types of bankruptcy, which are named after the title chapter of the federal bankruptcy act. Below given are the three common types of bankruptcy available.
Chapter 7 is also called as liquidation bankruptcy. In the chapter 7 bankruptcy rules, all assets and the non-exempt properties if they exist are turned to a trustee for converting them into cash, so they can pay it to the creditors. In return of this the debtor will receive Chapter 7 discharge which will release all the debts from his accounts. To check whether a person is eligible for filing chapter 7 or not, he has to give Chapter 7 Bankruptcy Means Test. This test is a formula which is designed to keep away the filers of higher income from filing it.
This bankruptcy is normally used for business and it’s not an option for an individual consumer. This type of bankruptcy gives business an opportunity to reorganize the business, restructure the debts and get out from it. It’s also expensive to pursue chapter 11 bankruptcy.
Chapter 13 bankruptcy is also called as mini-chapter 11 because it also allows few qualified individuals and small proprietary business to file it. Chapter 13 bankruptcy enables a debtor to retain his assets which would or else be liquidated by chapter 7 trustees.
According to chapter 13 bankruptcy information, one can keep his home and car under chapter 7 or chapter 13. Though there are few cases in which it would not allow to keep the rental properties, gun collections etc. but if a person files for chapter 13 bankruptcy then he can keep his luxurious items.
About the Author
Attorney Steven Peck has been practicing law since 1981. A former successful business owner, Mr. Peck initially focused his legal career on business law. Within the first three years, after some colleagues and friend’s parents endured nursing home neglect and elder abuse, he continued his education to begin practicing elder law and nursing home abuse law.