If you’re having trouble paying your debts, you may be considering filing for bankruptcy. There are several long-term implications regarding filing for bankruptcy, so it’s important to know what you’re getting yourself into.

Read on to learn more about the different types of bankruptcies.

Bankruptcy Defined

There are several different types of bankruptcies that you may file for. Some of the most common are as follows:

Chapter 7
Chapter 11
Chapter 12
Chapter 13
Chapter 15

Chapter 7

This type of bankruptcy is a liquidation process provided for consumers and businesses. The assets you possess that aren’t exempt from creditors are gathered and liquidated. When your assets are liquidated, that means they are reduced to a dollar value. The proceeds from your assets are then distributed to creditors, such as banks and credit card companies.

If you plan to file as a consumer, you’ll get a full discharge from debt under Chapter 7, excluding particular debts that are barred from being discharged by the Bankruptcy Code.

Chapter 11

This type of bankruptcy supplies a procedure for you, as a consumer or a business, to restructure your debts as you continue to function. Most Chapter 11 bankruptcies are filed by businesses. In coordination with your creditors, you’ll develop a method in order to reorganize your debt payments.

Chapter 12

This type of bankruptcy permits a family farmer or fisherperson to file for bankruptcy, restructure business dealings, pay back all or portions of debts, all while continuing to function as a business.

Chapter 13

This type of bankruptcy is also referred to as wage-earner bankruptcy because it’s mainly used by singular consumers to restructure financial holdings using a repayment plan that needs to be concluded within three to five years. In order to qualify for Chapter 13 bankruptcy, you’ll need to be earning routine income. In addition, you must not have accrued more than a particular amount of debt, as expressed in the Bankruptcy Code.

Chapter 15

This type of bankruptcy supports you as a debtor, any creditors you’re involved with, and other parties of interest connected with liquidation cases in foreign countries with a process by which you all can assert your rights. This type of bankruptcy is designed to supplement a principal case or process established in your home country. A key goal of this chapter is to motivate cooperation and communication between the U.S. courts and parties of interest and foreign courts and parties in interest in cross-border transactions.

Reasons to File For Bankruptcy

There are several reasons why you might consider filing for bankruptcy. If you’re a consumer, chances are, you’re thinking of filing for Chapter 7 bankruptcy. Some of the most common reasons people file for Chapter 7 bankruptcy are as follows:

Unemployment
Mounting medical expenses
Severely overextended credit
Marital issues

After You File

Once you file for bankruptcy, you’ll receive a discharge notice within four months of filing. The bankruptcy will remain on your credit report for ten years, but that doesn’t mean you’re financially destroyed. You may still be able to buy a home or another large ticket item within the ten years following bankruptcy.

An Overview of Bankruptcy