When faced with a tremendous amount of debt, some consumers will turn to bankruptcy as a last resort. Generally, there are two different types of bankruptcies that most filers will choose from; the choices vary widely and will usually come down to either debt repayment or debt discharge. However, there are also other types of bankruptcies out there, all of which impose different terms. The different types of bankruptcy include:
Chapter 13 bankruptcy
One of the most common types of bankruptcy is a Chapter 13 bankruptcy, which involves debt repayment. Under Chapter 13 bankruptcy, debtors may be eligible to keep certain assets, but must restructure their debt payments into a three to five-year repayment period. In order to qualify for a Chapter 13 bankruptcy, a filer must meet specific income requirements to show that they have the financial means to pay back their debts.
Chapter 7 bankruptcy
Another very common type of bankruptcy is Chapter 7 bankruptcy, which can allow filers to start with a clean slate and discharge their debts. Consumers interested in filing for Chapter 7 bankruptcy must pass a “means test” in order to be eligible, which varies by state. Although a filer may not be liable to pay back their debts after declaring Chapter 7 bankruptcy, there are still many disadvantages to be aware of. In addition to very bad credit, Chapter 7 bankruptcy filers can also potentially lose their assets; assets are often liquidated and the money is used to satisfy past due debts. Another thing to consider is that not all debts can be discharged through Chapter 7 bankruptcy—student loan debts, for example. As such, if there is a specific debt you are hoping to discharge through Chapter 7 bankruptcy, make sure it qualifies.
Chapter 11 bankruptcy
Chapter 11 bankruptcy is frequently classified as the most complex and expensive types of bankruptcy, but in some situations, may be the necessary choice. Usually filed by corporations and partnerships, Chapter 11 bankruptcy can give companies the opportunity to settle their past due debts, but with a more flexible deadline.
Chapter 9 bankruptcy
As an individual filing for bankruptcy or as a company, you won’t be filing for Chapter 9 bankruptcy. This type of bankruptcy is a specific variation of bankruptcy that has been created for towns, municipalities, cities, and the like. It allows the filing party to manage their debts and restructure a more affordable repayment plan, without liquidating assets.
Chapter 12 bankruptcy
Chapter 12 bankruptcy is another exclusive type of bankruptcy that is only for qualifying farm owners and fishermen who have fallen behind on loan payments. Certain requirements must be met, including income minimums.
Are you in a substantial amount of debt and seriously contemplating bankruptcy? Before you turn to bankruptcy to solve your financial woes, you may want to carefully reconsider and explore your other options. Bankruptcy can have serious credit implications for years to come, and it can be a decision that you come to regret. If you’re receiving structured settlement payments, you may already have the cash you need to pay off your debt, but it’s tied up in a long-term payment stream. While those monthly payments might be helpful, they just might not be enough to take care of all of your bills if you’re in a lot of debt. Why not access your money upfront by selling future payments to Peachtree Financial Solutions? By purchasing your future payments, we can provide you with a lump sum of cash, which can make it easier for you to tackle debt and catch up on bills. Contact Peachtree Financial Solutions today to learn more about selling future payments for a lump sum of cash.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.