Understanding the Different Types of Bankruptcy Set Up by US Congress

Understanding the Different Types of Bankruptcy Set Up by US Congress
By: Muna wa Wanjiru

When someone has financial problems they look at bankruptcy as a means of ending their debts in a legal manner, and restarting their lives and businesses. There are four main types of bankruptcy that a person can file for.

Each of these bankruptcy laws has been taken from the bankruptcy code and they have certain parameters that must be complied with for the debt to be considered ended.

The four main types of bankruptcy are chapter 7 or liquidation, chapter 11 or reorganization, chapter 12 or family farmer or fisherman and chapter 13 or repayment of the debt. Each of these bankruptcy laws deal with different aspects of the bankruptcy code and as such they must be looked at separately.

In chapter 7 the various assets of the person or company can be given into the keeping of a court appointed trustee. This individual will assess these various properties, monetary amounts and other disposable assets. Once the value for these has been found these items will be liquidated into cash.

This cash will then be paid to your various creditors. Once the court declares that you have filed a chapter 7 bankruptcy this action will remain on your public bankruptcy record for about 10 years. The process of bankruptcy is different with the other types of bankruptcy.

Chapter 11 is another of the four main types of bankruptcy that corporations can use. With this bankruptcy course the company will need to be organized in a manner that will bring in profits to the company. The profits will in turn be distributed to the creditors until the debt is finished.

Once the creditors have been given their full payment you can use the time of the debt to manage your finances to bring the company out of the financial mess that it is in. As this is a complicated process it is best to discuss all the aspects of this bankruptcy type with your lawyer.

In the types of bankruptcy that family farmers and fishermen can look for help, chapter 12 is designed for this. This type of bankruptcy can only be used by these people. Chapter 12 is similar to chapter 13 as it allows the debt to be repaid over a period of time with the future earnings that the person makes.

In chapter 13 the bankruptcy takes the form of you repaying all or part of your debt for the period that you have filed for bankruptcy. In this type of bankruptcy you are given a ceiling period of about 5 years in which to pay off your debt. The plan for paying these debts is one that is approved by the courts.

In these types of bankruptcy cases if you have a legitimate financial problem the court will issue an automatic stay order. At this order your creditors can't call or talk with you about the case or how you will repay them, instead they must get this information from your lawyer.

Article Source: http://www.articlesbase.com/credit-articles/understanding-the-different-types-of-bankruptcy-set-up-by-us-congress-251745.html

About the Author: Muna wa Wanjiru. Muna wa Wanjiru is a web administrator and has been researching and reporting on internet marketing for years. For more information on types of bankruptcy, visit his site at TYPES OF BANKRUPTCY