Kinds of Personal Bankruptcy
When it comes to individuals, as opposed to companies, there are two common kinds of bankruptcy: Chapter 7 and Chapter 13. Here is a quick summary of how each kind works:
Chapter 7: This kind of bankruptcy basically liquidates your assets in order to pay your creditors. Some assets-- usually including part of the equity in your home and automobile, personal items, clothing, tools required for your work, pensions, Social Security, and any other public benefits-- are exempt, meaning you are able to keep them.
But your remaining, non-exempt assets will be liquidated by a trustee appointed by the bankruptcy court and the proceeds will then be distributed to your lenders. Non-exempt assets may include property (apart from your main residence), recreational vehicles, boats, a second vehicle or truck, collectibles or various other valuable items, bank accounts, and investment accounts.
At the end of the process, most of your debts will be discharged and you will no longer be under any obligation to repay them. However, particular debts, like student loans, child support, and taxes, can not be dismissed.4 Chapter 7 is usually chosen by people with lower income and few assets.
Chapter 13: In this form of bankruptcy, you are permitted to retain your assets, but have to agree to pay off your debts over a given period of three to five years. The trustee collects your repayments and distributes them to creditors. Chapter 13 bankruptcy is normally chosen by individuals that wish to retain their non-exempt property intact or buy time against repossessions or property seizures.
For more information about Personal Bankruptcy in Westminster, California, contact Thomas K. McKnight LLP at (800) 466-7507 or visit our website at TKMLLP.Com for a free consultation!