Friday, December 11, 2009
Types of Bankruptcy
By Shawn Chandok
When filing for bankruptcy, there are usually 2 types of bankruptcies that are common, Chapter 7 and Chapter 11. Chapter 7 bankruptcy is considered one of the worst because it is complete liquidation of assets. The court first follows a procedure where they assign a trustee to evaluate all your assets and wealth. Once that is done, he/she converts all convertible assets to cash in order to pay off debtors and creditors. However what makes chapter 7 unique is that “In most chapter 7 cases, if the debtor is an individual, he or she receives a discharge that releases him or her from personal liability for certain dischargeable debts. The debtor normally receives a discharge just a few months after the petition is filed.”
Chapter 11 bankruptcy is also known as reorganization. Under chapter 11 bankruptcy, the debtor usually has a certain amount of days to convince his debt holders why he should be given more time to pay off his debts. If the court approves this decision, the debtor is given a grace period of a certain amount of time where he will not be charged any expenses, however he must begin to pay off his previous debt to show future prosperity.