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The Different Kinds of Bankruptcy
By Suzy Vanstrusen
Bankruptcy comes in different categories. Each one is created to specifically correspond to the situation of the individual who is filing for bankruptcy. In the past years, a person who wishes to declare bankruptcy can choose on his own to which bankruptcy category he wants to file for. Beginning October 17, 1995 however, a new amendment was approved in the Bankruptcy Law that governs the US.
Today, a person cannot make a decision on his own. Bankruptcy chapters 7 and 13 particularly are now accompanied by certain qualifications that the individual needs to pass. This is called the means calculation. In this test, the expenses will be subtracted from the monthly income of the individual. The result will then be multiplied by 60 (a fixed number) in order to determine whether he or she will be eligible for a Chapter 7 or Chapter 13 bankruptcy.
Chapter 7 bankruptcy gives the individual freedom from all charges in his account. This is where a person is completely discharged from all debts he incurred. If the result of your means test calculation shows that you will not be capable to pay off your debts, then you will be qualified to declare Chapter 7 bankruptcy.
If your means test calculation results to at least $6,000 and above, you are then ordered to file for Chapter 13 bankruptcy. A Chapter 13 puts you in a repayment plan where you are required by the law to submit at least 10% of your monthly salary in payment of your debts. However, you are allowed to maintain ownership of your properties.
Other kinds of bankruptcy are the Chapter 9, 11 and 12 bankruptcies. Chapter 9 is a bankruptcy provision intended for municipalities or public agencies. This can be considered as the most complicated category since it involves a large group of people.
Chapter 11 is a bankruptcy proceeding done by business corporations. No bankruptcy trustee will be designate to decide on a Chapter 11 case. The corporation that filed for bankruptcy will have to create a recovery plan on its own.
Chapter 12 bankruptcy is for family farmers and fishermen. Filing for a Chapter 12 bankruptcy protects a farmer or a fisherman from losing his assets to his creditors. Instead, he will only be required to pay his debts through his earnings.
Generally, the new bankruptcy law requires everyone to undergo credit counseling under a credit counseling agency accredited by the government. This must be done at least six months before they file for bankruptcy. The credit counseling agency will take a look at the individual's debt problem and try to find solutions other than bankruptcy. If the credit counseling agency recommends filing for bankruptcy, that's the only time the application can be started.
The individual should then find a bankruptcy attorney who will prepare the bankruptcy documents and who will be representing him in the bankruptcy court. A bankruptcy judge will be the one to seal the approval for the discharge once bankruptcy is declared and filed.
©
Suzy Vanstrusen is a credit analyst and a writer of the website EZCreditRepairSolutions.com and has been providing consumers with tips and tricks in repairing your credit. Check the site for more free credit repair tips and credit repair services. |
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