When financial troubles arise, you may feel stressed, scared, or overwhelmed. You may receive letters, phone calls, or emails from debt collectors demanding payment or threatening you. Your credit score may also be affected by debt, which can impair your ability to get a loan, buy or rent a home, or buy a car. So, what do you do?
To ease serious financial trouble, many people decide to explore bankruptcy. Bankruptcy is a type of legal proceeding through which filers (also called debtors) can resolve or eliminate debt, or get a fresh financial start. When you file bankruptcy, creditors cannot attempt to collect debts from you until the court has resolved your bankruptcy case according to the law. Further, depending on which form of bankruptcy you file, you may exit bankruptcy with a better overall financial standing, and a credit score that will be more easily improved. Let’s take a look at the common forms of bankruptcy that may be right for you.
Common Forms of Bankruptcy
There are four forms of bankruptcy, each named for the chapter of United States Bankruptcy Code represented. A brief description of each form includes the following:
- Chapter 7 – Chapter 7 is the most common form of bankruptcy filed by individuals or families. Chapter 7 is also called “straight” or “liquidation” bankruptcy because the debtor will either ask the court of discharge the debt altogether, or will liquidize (sell) assets beyond a certain limit in attempt to pay back a portion of debts.
- Chapter 11 – Chapter 11 is a form of bankruptcy most often used by businesses. Chapter 11 is considered a “reorganization” bankruptcy, and is generally pursued by debtors with very large debt or complex assets.
- Chapter 12 – Chapter 12 bankruptcy offers specific provisions for family farmers.
- Chapter 13 – The second most common form of bankruptcy, Chapter 13 is considered a form of “debt adjustment”. Under Chapter 13, the debtor works with the court to create a plan for repaying all or part of debt within the confines of his or her current income. Chapter 13 is recommended for individuals who have suitable income, but who have fallen behind on payments, or experienced a financial crisis that may be rectified with time.
Is Bankruptcy Right for Me?
The only way to determine if bankruptcy is right for you is to contact a bankruptcy attorney to discuss your financial situation and your options. Daic Law offers guidance for clients considering bankruptcy, and can help you understand the best course of action to improve your financial standing. Contact Daic Law today for a no-obligation consultation. We can help you determine which form of bankruptcy may be right for you, and will work together with you to create a better financial future for you and your family.