It might come as a shock to most people to learn that there are many types of bankruptcy proceedings. The biggest misconception people have about bankruptcy is that it is the end of someone financially. And that is usually accompanies by the perception that the individual filing for it has gone through significant financial hardship and it is the very last resort when the cards finally start tumbling down. But on the contrary, bankruptcy is a process that allows someone who is basically financially destroyed to start afresh.
But unlike what we commonly think, you don’t necessarily have to sell of everything you own and subject yourself to the constant scolding from your wife. What happens depends on the type of bankruptcy you are applying for. And they are often labelled by Chapters. The choice of which one to go for is also often a strategic move which you should seek expert advice from your lawyer. Here are 5 of the most common ones.
Chapter 7
This is the most comprehensive one that reduces whatever valuable assets you have into rubble. It is basically a liquidation of your most highly valued assets by an appointed third party. The proceeds will then be distributed to your creditors. This is the one you have least control over and can be avoided if you have large amounts of assets or you are a high income earner.
Chapter 11
This type of filing is meant for companies who need to restructure financially in order to stay in business. It affects you if you are a business owner. You might think why legislation allows companies to do this. This is because if organizations are allowed to fail so easily, it sets the stage for scammers to exploit it. Also, the fall of companies can affect many people with their employment. Chapter 11 is the most costly and complicated among all of them. And likewise, you will still be liable for your debt when you complete the restructuring.
Chapter 12
Chapter 12 proceedings concern those in the trade of fishing and farming. Because these are important industries that can gravely affect our way of life, people in these profession are given special treatment. Under this plan, they will propose repayment plans of up to 5 years to repay their debts. If within the repayment period, the bankrupt runs further into financial hardship, the judge can actually all off the remainder of the obligations provided certain conditions are met.
Chapter 13
This is the most common one when you are being chased relentlessly by creditors. You will not be forced to liquidate your assets. But you must draw up a payment plan to propose to the court for approval. During the repayment period, you are protected from further lawsuits and collection demands. The drawback is that you will be labelled as a bankrupt for as long as the repayment plan is not fully exhausted.
Chapter 15
Because bankruptcy laws can vary from state to state and country to country, something has to be done to somehow link them together. Because if someone can just leave a country to “write off” his bad record, what’s the point of all these laws anyway. Chapter 15 is meant to coordinate all these proceedings that are held or in process in different countries.