BANKRUPTCY – DIFFERENT HIGH RISK TYPES
When there are financial problems many
people have no idea where to go. If you
decide to file for bankruptcy then you
will be in a better position if you know
the facts. You should know and
understand the mechanics of it, because
they are confusing. Going through this
process will help you make the best
choice. One fact that you may not be
aware of is: bankruptcy codes are
created to protect people from financial
stress. There are 6 types of
bankruptcies that you can file if you
are an American.
“Chapter 7” is the first type. It is
also referred to as “Liquidation
Bankruptcy”. This is the most popular
option for many. In this type, the
debtor’s assets are liquidated and the
funds generated are used to pay
creditors. It will take up to three
months to be completed. The drawback is
that your credit report will have this
for a minimum of 10 years. Also, you
cannot file for bankruptcy again in the
next 8 years.
The next type is “Chapter 9” which is
less known. It is specially designed for
municipalities. The municipality may
exist in a village, town, city, etc. In
this type, the debt is restructured in
such a way that the debtor can pay them.
The next popular type is “Chapter 11”.
This type of bankruptcy permits the
business to reorganise its debts without
halting its operations. Then, a
reorganisation plan is created by the
debtor so that he is able to repay all
his debts. The plan should be approved
by all the creditors to become valid.
This may go on for up to 5 years. But
after 5 years the debtor will be clean
and can begin a new life.
“Chapter 12”, under the bankruptcy laws,
is specially designed to protect
fisherman and farm owners. The debtor
will be given all control on how he
wants to repay the debt. He can also
choose to pay only part of the total
Then, there is the “Chapter 13” for
those individuals who want to reorganize
all their debts with a practical
repayment plan. The debtor bears the
entire weight of the debts, thus
reflecting positively in his credit
report. This reduces the number of years
that your credit report will be affected
to 7 years, from 10 years.
There is a new bankruptcy law, referred
as “Chapter 15”. It helps in dealing
with international debts.
Then there is the medical bankruptcy.
Inability to pay your medical bills will
lead to this. Big medical bills are one
of the reasons for the financial
problems of many people. With several
charges starting with doctor’s fees to
paying for drugs, medical attention is
becoming more of a luxury. This is the
reason why several people declare
medical bankruptcy. There is one very
effective way to stay out of this: get
medical insurance for you and your
family. Then your bills will be paid by
the insurance company and you will not
have to file for medical bankruptcy.
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