It is no easy decision to choose the route of filing bankruptcy when financial storms are brewing, but sometimes it is necessary. Once the decision has been made, it is critical to understand the options that lie ahead.
There are several different types of bankruptcy, and they all have their pros and cons. Take a moment to look over this quick breakdown of the main types of bankruptcy and what they entail.
Identifying the four main types of bankruptcy
The law does not limit the possibilities when it comes to legally proclaiming our brokeness. There are more than four ways to file for bankruptcy, but for the sake of time, here are the four most common types of bankruptcy.
- Chapter 7 Filing
- Chapter 13 Filing
- Chapter 11 Filing
- Chapter 12 Filing
A closer look at Chapter 7 bankruptcy
This type of bankruptcy is typically filed by individuals who do not have very much in the way of assets. It does require filers to liquidate whatever property possible to pay off debtors, but it is common that people do not lose much of their stuff in the process.
Chapter 7 can be filed far more quickly than other types of bankruptcy, and it is not absolute that a person would need to hire a lawyer. The process is easy enough that individuals can file on their own with a little research.
Filing Chapter 7 bankruptcy, unlike some, will not stop the bank from foreclosing on a neglected mortgage. It will slow down the process, however. Just understand that, eventually, the foreclosure will proceed.
A closer look at Chapter 13 bankruptcy
Chapter 13 bankruptcy is much more substantial than its more simple counterpart. This type of bankruptcy is for those who have a whole mess of debt and a very complicated list of assets.
The process takes much longer than Chapter 7, but Chapter 13 allows individuals to maintain possession of most of their property. It will stop foreclosures as well. Some individuals that meet the financial requirements of Chapter 7 choose to file 13 instead to maintain their possessions.
Chapter 11 and 12 bankruptcy
The last two types of bankruptcy are similar to Chapter 13 in the way that they offer a chance for debt reorganization, but they are designed for a specific type of debtor.
Chapter 11 is a bankruptcy option that typically suites the needs of large businesses and corporations. Lowly individuals (sarcasm) can choose to file Chapter 11, but it never really makes much sense to do so.
Chapter 12 bankruptcy is targeted towards farmers and fishermen. Repayment plans for this sort of bankruptcy are designed to be a bit more flexible than others. Also, higher debt limits and a wider range of lien stripping options.