Bankruptcy is often employed as a last resort when a person or entity is so far in debt that there is no other alternative. The different types of bankruptcy are denoted as chapters because they are included in the United States code. Bankruptcy is listed under Title 11 and actually has 9 chapters, most of which are odd numbers starting at 1, except for the use of 12.
Most Common Filing Types
- Chapter 7: Also called liquidation, this chapter allows individuals or corporations to sell their assets to pay down debt.
- Chapter 11: This chapter is the hardest to use because it requires being above the limits of Chapter 13.
- Chapter 13: The most widely used to reorganize debt, Chapter 13 assumes that there is some sort of living wage available to help borrowers reduce their debt.
Although filing for bankruptcy will help eliminate some unsecured debts, there are exceptions that cannot be expunged. Court ordered payments such as alimony and child support are still required, as well federal student loans. In addition, only a certain amount is eligible under the claim. Finally, declared bankruptcy remains on credit reports for seven to 10 years.
Bankruptcy is an option for those who are desperately drowning in debt. However, before filing, it is essential to have all the facts. To enlist the assistance of a bankruptcy lawyer, contact the Law Offices of Paul McElrath today.