Personal bankruptcy is the most common form of bankruptcy. The bankruptcy laws in the bankruptcy code have provided various provisions for personal bankruptcy. In this competitive world, things move very fast, therefore, in an attempt to meet the standard of living set by the society, many people fall in the cruel trap of various kinds of debts. If you are not very careful in handling your financial matters, these debts may put you in a deep financial trouble and sometimes, things may just go out of your control. There might be a situation when the debts you owe to the various creditors are much higher than the assets you own and the means of income you have. This is the time when you would probably like to give your financial life a fresh start by closing the old chapters. Here, you will have to take the help of various chapters as described in the bankruptcy code. Let’s go exploring the various options that the bankruptcy code provides you.
Chapter 11 Bankruptcy
Chapter 11 bankruptcy is another form of personal bankruptcy and can be a great solution for those who have a regular source of income and still have hopes to get their finances managed for which all they need is some debt-free time. It is a heavy burden of debts that is stopping them from actively participating into their business activities and put the same on the path of profit. In usual circumstances, especially in genuine cases, the bankruptcy court delivers its judgment in the favor of the debtor. The court asks the creditors to lower down their claims to reduce the burden of debt on the debtor while the debtor is asked to make a repayment plan to pay off the creditors’ reduced claims. The bankruptcy court also appoints a trustee to keep an eye on the business activities of the debtor. They help the debtor to get their financial matters re-organized. They will also see if the payments to the creditors are being made in timely manner as per the repayment plan approved by the bankruptcy court.
Chapter 7 Bankruptcy
The chapter 7 bankruptcy is a form of personal bankruptcy where people do not have any hope to reorganize their financial life. In this case, the bankruptcy court orders the trustee to liquidate all the assets owned by the debtor and the amount thus collected is used to pay off the creditors’ claim as per the priority status if any.
Once a debtor is granted personal bankruptcy, it will affect his or her credit life for the next 10 years at least.