There are three varieties of bankruptcy under US law: Chapter 7, Chapter 11, and Chapter 13. The chapters of bankruptcy correspond to sections of the United States Code. You must review Chapters 7 and 13 as an individual, as Chapter 11 is reserved for business entities only. Before deciding which of these two chapters is most applicable to your situation, you must first understand your situation.
How does Chapter 7 bankruptcy work? Before you can qualify for this variety, you must pass a """"means test"""". If you pass away, a trustee will sell your properties and distribute the proceeds to your creditors. In the liquidation, the trustee will only sell properties that are not exempt. This means that you may be able to retain some of your properties if they are excluded from liquidation. In this form of bankruptcy, you will be able to discharge all of your debts and receive court protection against creditors' collection harassment.
If you do not qualify for Chapter 7, you can then petition for Chapter 13. Chapter 13 bankruptcy: how does it operate? In contrast to Chapter 7, it requires a repayment plan rather than the liquidation of your assets. The repayment plan is a five-year reorganization of your debts. There are certain obligations that can be discharged under Chapter 13 but not under Chapter 7.
Both forms of bankruptcy should be able to provide you with a fresh start, as they both involve an attempt to repay your debts to creditors while protecting you from creditor harassment. There is, however, a negative consequence: a negative note on your credit report for up to ten years. With such a report, your chances of obtaining a new loan, property, or credit card are slim to none. The credit report will reflect the filing date, not the date of final payment. Therefore, if you are truly in dire straits and bankruptcy is your only option, it is preferable to file as soon as possible so that you can complete paying off your debts and rebuild your credit sooner.
Now that you know the answer to the query """"how does bankruptcy work? """", you can choose the option that best fits your current circumstances. As you can see, it does have its advantages and disadvantages. It may not be ideal, but it is certainly one approach to help you quickly get out of debt.""
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