Bankruptcy involves a debtor ,who can be an individual or business, and creditors. It’s the state of not having enough money to pay the debts.
Bankruptcy is of different types and can be categorised in the following basic ways. The four type of bankruptcies are named under the name of the four chapters:
Chapter 7: It’s the most common of all types of bankruptcy. It is liquidation bankruptcy, which means the creditors can sell all the non-exempt assets to recover debts to maximum possible extent and the rest of the portion of the debt that can’t be repaid is discharged. Every individual, corporation and partnership comes under this bankruptcy.
Chapter 11: It’s preferred mainly by businesses, although some individuals are also eligible under this. Under this bankruptcy, the debtors continue functioning and ownership of the assets remain with them only but they try to find a reorganization plan to pay off debts. A debtor has to submit a plan within 120 days only.
Chapter 12: It’s basically for the debtors who are farm owners. They continue to own and work on their assets to repay the debts. They work on repayment plan with creditors.
Chapter 14: It’s similar to the chapter 11, but involves individual debtors. They retain the ownership and control of the assets but at the same time work on a three to five year repayment plan. At times, depending on the income of the debtor , a portion of the debt may get discharged but there is a limit on the amount involved.
To understand and examine the whole process, debtors might need some legal help and bankruptcy attorneys are experts in it. For instance, if there is some case of San Diego, a debtor can approach San Diego bankruptcy lawyer to look into the matter and give expert advice. An attorney like bankruptcy attorney San Diego can use his or her expertise to help a debtor to come out of the financial crises.