This article provides an overview of the different types of bankruptcy. In addition, it covers a list of resources to help you learn how to go about filing for bankruptcy.
Individuals and businesses often become overextended in regard to their finances. They purchase items and services that go beyond their ability to pay. Some use various types of loans and credit, which exacerbates their financial situation. Once the point is reached where expenses exceed their ability to pay, the only option is to file bankruptcy.
It is defined as the legally declared inability or impairment of the ability of an individual or organization to pay creditors. A declared state of bankruptcy can be requested by creditors in an effort to recoup a portion of what they are owed; however, in the overwhelming majority of cases, the process is initiated by the bankrupt individual or organization.
There two main types of bankruptcies – Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
Under Chapter 7, an individual’s assets are turned over to a trustee. The assets are then sold off to repay creditors. Once you’ve filed, the creditors are not allowed to attempt to collect funds directly from you. Once everything is sold and the creditors have been paid, you are no longer responsible for the debts. There are some debts that cannot be discharged, such as alimony or child support, certain types of judgments and criminal fines, certain taxes, student loans, items of substantial value that were recently purchased, and properly executed contracts for land and automobiles.
Chapter 13 Bankruptcy
The other popular type is Chapter 13. Under Chapter 13, debts are reorganized into a more manageable schedule and amount. Similar to Chapter 7, certain debts cannot be discharged such as alimony and child support, criminal fines and judgments, and student loans.
Determining which type is best is up to the individual. If you are considering filing, it is wise to consult both a Certified Public Accountant (CPA) and an attorney.
If you’d like to learn about other law-related terms, view other legal and law definitions in our Investigation Glossary. Also, if you need legal forms related to filing, view the full list of legal forms at Nolo.com.
Bankruptcy Resources, Tools and Websites
The following tools may be useful in conducting investigations related to bankruptcy cases. You’ll find information on filings, statistics and analysis, legislation information, and more.
Run a Bankruptcy Search at BeenVerified – If you need to find information about a person’s financial background, use this simple online search tool to get the details. You can run a search by name, phone number, email address, or even property address. Just enter the appropriate information and click enter. The search tool will check billions of public records and provide you with a list of names that match your search. Select the person you’re looking for and build a report. The online search will check for financial information, tax liens, judgments.
Other Online Resources
- American Bankruptcy Institute – Comprehensive information about legislative news, statistics, judges’ opinions, code, and analysis.
- Administrative Office of the U.S. Courts – Federal forms, resources, administrators and resources for learning about financial matters and the legal ramifications of declaring.
- American Board of Certification – Certifies attorneys as specialists in business and consumer and creditors’ rights law.
- National Association of Bankruptcy Trustees – Contains news of upcoming seminars, links to legislative information about bankruptcy, and a listserv and library for members only.
- National Association of Consumer Bankruptcy Attorneys – Contains information about the association and cases of interest.
- US Bankruptcy Law – Code courtesy of the Legal Information Institute of Cornell Law School.
Questions and Comments
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