Read and discuss the kinds of bankruptcy. Bankruptcy is a lawful standing of a person or a company which is imposed by the court of law. It is imposed to a person/company when someone cannot repay their debts. Paying debts regardless of any issues is mandatory for everyone; sometimes due to bad financial situation some people can’t repay their loans which can cause them bankruptcy. There are different kinds of bankruptcy which is imposed to an individual/business according to the nature of the loan.
According to law, kinds of bankruptcy are divided into five chapters. Each chapter discusses different situation and criteria of bankruptcy. The brief of every chapter is given below to give you an idea about different kinds of bankruptcy.
Straight Bankruptcy (Chapter 7)
It is among the easiest kinds of bankruptcy. If someone can’t pay its credit card, loans or other bills they can file this type of bankruptcy and discharge this obligation. After all your major expenses you are not left with any money to pay your bills and loans this type of bankruptcy is best to use, you won’t lose everything you own, some amount of property can still be owned by you which is called exempt property. In some cases where amount of loan is bigger than the total assets you should give up everything and get a loan free life rather than surviving with heavy debts on your shoulders.
Municipality (Chapter 9)
This is among those kinds of bankruptcy which deals with the adjustments of debt related to municipalities or public agencies. It is little complicated kind; you need an experienced lawyer for this type of bankruptcy. It provides protection to the municipalities from their creditors to adjust their loans. Unlike chapter 7, there is no option of liquidation, where someone can clear all their debts with their personal property. It provides confirmation plan for debt adjustment and make sure that plan is being followed.
Corporate Reorganization (Chapter 11)
This is among those kinds of bankruptcy which deals with the business corporations. Here, no single person is liable for any debt. Whole Corporation will come across to deal with this kind of bankruptcy. Whole Corporation have to come up with the suitable debt adjustment plan, it can include recovering from organization productivity, selling corporate assets, mergers or debt consolidation.
Farm Reorganization (Chapter 12)
This is among those special kinds of bankruptcy which is only available for family farmers and fishermen. In this case farmers and fishermen don’t need to sell any of their assets to repay their loans but, they have to pay back their debt through their future earnings.
Consumer Reorganization (Chapter 13)
Consumer reorganization plan allows you to pay a certain amount to your creditor according to your ability to pay. In this kind of bankruptcy, there is no need of full payment at a time; payment can be done in installments or on monthly bases. But, you have maximum time of 5 years to clear all your debts. After full payment has been recovered bankruptcy is discharged, and you can start a new loan free life.