Many people struggle with overwhelming debt. Overwhelming debt can be sudden and unexpected. For example, suffering an injury may cause someone to face large amounts of medical debt, while unemployment may lead someone to fall behind on their debt obligations.
One of the options for people to start clean when facing overwhelming debt is bankruptcy. There are many forms of bankruptcy. Here are three you should know:
1. Chapter 7 bankruptcy
Chapter 7 bankruptcy is one of the most commonly filed forms of bankruptcy because it is quick and easy. Chapter 7 bankruptcy allows debtors to relieve some or all of their unsecured debt, such as medical debt, credit card debt and loans.
Another name for Chapter 7 bankruptcy is a liquidation bankruptcy. In some rare cases, filers will have their nonexempt assets liquidated to satisfy debts. Any exempt assets may be safe from the liquidation process.
2. Chapter 11 bankruptcy
If a business or company needs to file for bankruptcy, then one of its options is Chapter 11 bankruptcy. Chapter 11 bankruptcy is a reorganization process. What this means is that a business can have its debts and obligations restructured so that they’re affordable. This, essentially, can allow companies and businesses to continue to operate, despite having filed for bankruptcy.
3. Chapter 13 bankruptcy
If an individual has some disposable income and doesn’t wish to file for Chapter 7 bankruptcy, they may wish to file for Chapter 13 bankruptcy instead. Chapter 13 bankruptcy allows filers to pay off some of their debts and, after 3 to 5 years, they may have their remaining debt resolved. This works by having a filer’s debt reorganized, much like Chapter 11 bankruptcy into payable chunks.
When considering bankruptcy, you should be aware of your legal options. Experienced legal guidance can help you determine what’s right for your situation.