Bankruptcy: it’s NOT for Everyone!
Good people file bankruptcy. Although there may be an unfair stigma attached to seeking debt relief, do not be misled. In some cases, it is due to poor financial decisions. However, with the unemployment rate rising to the double digits, many individuals simply have no other option. If you are considering bankruptcy, please know that you are not alone.
Types of Bankruptcy
There are several types of bankruptcies: Chapter 7, Chapter 11, Chapter 12 and Chapter 13. But for consumers, there are really just two types: a Chapter 7 “Liquidation” or a Chapter 13 “Reorganization” (a.k.a. the “Wage Earner's Plan”).
In a Chapter 7 bankruptcy, all your “nonexempt” assets are converted to cash and distributed to your creditors. Once the bankruptcy is completed, you will receive a discharge and will not be responsible for any of the debts that were listed in your bankruptcy petition.
As the debtor in a Chapter 13 bankruptcy, you propose a repayment plan (the “Plan”) of all or some of your debt over a 3-5 year period. If the plan is accepted, the bankruptcy court will supervise the repayment plan’s implementation. When you have made all the payments under your proposed plan, your bankruptcy is completed and you will receive a discharge and no longer be responsible for the debts carried out in the plan.
Are you Considering Bankruptcy?
The Administrative Office of the US Courts has put together a series of videos on the topic of bankruptcy. Bankruptcy Basics provides basic information to debtors, creditors, court personnel, the media, and the general public on different aspects of federal bankruptcy laws. It also provides individuals who may be considering bankruptcy with a basic explanation of the different chapters under which a bankruptcy case may be filed and answers some of the most commonly asked questions about the bankruptcy process.
Finally, Bankruptcy Basics should not substitute for the advice of competent legal counsel or a financial expert.
And again, no matter what anyone says, know that you are in good company. You are not a bad person. Many good people file bankruptcy; and you are not alone.