What are the different types of bankruptcy? No one wants to go bankrupt. However, when the unfortunate happens, we are left with no choice but to file it. This is why it is important that one knows the types of bankruptcy. This way, when the unfortunate happens, we will know what to do. The two main types of bankruptcy are Chapter 7 and Chapter 13.
Chapter 7 is the first of the two types of bankruptcy. It states that you can have all of you debts discharged when your assets, the liquid ones, are used to repay some of debts that you have incurred. Liquid assets are the assets that you can easily and quickly turn into cash. When it comes to the types of bankruptcy, liquid assets that can be used are checking accounts or savings accounts that are under your name. There are also some liquid assets that should be turned over and distributed to the people you owe. This will be the payment to some of your outstanding debt. Keep in mind that there are also some assets that are non-exempt. These are the assets that are not qualified to be used to pay your creditors. Depending on the state and the types of bankruptcy, liquid assets are deemed non-exempt and exempt.
In order to be deemed qualified for the Chapter 7 types of bankruptcy you should be able to pass the test that proves your income is less than that of the median income of the size of your family. This depends on the state. However, keep in mind that if you do not pass this means test, then you cannot file for the Chapter 7 types of bankruptcy.
If you fail to pass the means test that will qualify you for Chapter 7, you still have another choice. You can file for the second types of bankruptcy, Chapter 13. Chapter 13 types of bankruptcy states that you can and you will be repaying your debts depending on the payment plan that you can afford. This can either be a 3 year plan or a 5 year plan. If you are deemed qualified for this, you will be assessed and the payment plan will be given to you by the state. This payment plan should come from you. You will be the one to write the plan and the court will just approve it or deny it.
In the Chapter 13 types of bankruptcy, a hearing will be held to approve the plan you have submitted. The creditors, however, can object to the amount of payments that you have indicated there. In these cases, the judge will have the final say. When the payment plan becomes finally approved, then you will then start paying your payments directly to the court. The best part about this is that once you have completed your Chapter 13 payment, whatever remaining debt you have will now be discharged.
Some people choose to file Chapter 13 over Chapter 7 when they have a debt that they are willing to continue paying, like a car loan or mortgage. This way, you will be able to keep the car that you have loaned.