Different Types of Bankruptcy: Advantages and Disadvantages
There are three types of bankruptcies:
- "Chapter 7" - All assets are liquidated, except those that are exempt in your state (possibly a home, car, clothing, household appliances,?life insurance,?pension, and work-related tools).
- "Chapter 11" - Intended largely for?businesses. Designed to allow a?business?to continue?operating?while repaying creditors through a court-approved?plan.
- "Chapter 13" - If you have?unsecured debts?of less than $269,250 and?secured debts?of less than $871,551, you may be entitled to this type of bankruptcy?protection, which allows you to keep certain property while you?pay?off your?debts?under the supervision of a court-appointed?trustee.
On the downside, it's not a "get out of debt free" card. Here are some of the disadvantages of declaring bankruptcy:
- You?need?to?file?the?claim?and pay a?fee. You may also need to pay a bankruptcy?lawyer?, and it can be difficult to find a good one, since some try to maximize their profits?by?handling?cases?as quickly as possible instead of giving your bankruptcy the attention it deserves.
- Some debts cannot be eliminated by declaring bankruptcy, including?taxes, student?loans,?alimony,?child?support, debts that resulted from?fraud?or?willful?injury?and some property?settlements,?fines?and?penalties.
- Your bankruptcy will remain on your?record?for up to ten years. This may make it difficult or impossible to obtain a?credit card?or a?loan.
To learn more about what happens if your company declares bankruptcy, read this article.
By InvestorGuide Staff