Types of Bankruptcy-what are the Different Types of Bankruptcy You Can File For?

So what are the different types of bankruptcy, and which one should you apply for? There are essentially three different kinds, and which one you decide to file for is based on your current financial situation.

The first, and probably the worst of the three, is chapter 7. For this, you will have to use your personal assets (ie house, car, whatever is non exempt) to pay off your creditors.

Yes, this can be a very difficult process, as saying goodbye to these possessions you worked for and earned is not easy. However, when you are done, you will be completely discharged of your debt, and can therefore get on the path to achieving financial freedom.

With that said, chapter 7 is the cheapest type of bankruptcy to apply for, and also by far the easiest to get accepted for, because it doesn't require any sort of payment plan. All you have to do is liquidate your current assets, and you are done.

However, this might not be your best option, and here's why: with chapter 11 and 13, you don't have to liquidate your assets, and can in fact pay off your debts with the future income you generate.

Of course, in the case of chapter 11, you will need to show a detailed plan for paying off your debts, and the court needs to approve it. also, you will need to show that you have enough income coming in, as well as a reasonable amount of debt to pay off, that the plan is feasible.

No far out projection or speculations with these types of bankruptcy-if the income isn't there, this won't get accepted, and you will have to use chapter 7. However, keep in mind that chapter 7 is only applicable to business bankruptcy, and not personal. That's where chapter 13 comes in.

For this, you also need to demonstrate that you have a steady income coming in, as well as relatively low amounts of debt (check your local area for the exact amounts). If you can show this, then the courts will draw up a 3-5 year plan for you to follow in order to pay off your debts.

With this plan, you can use it for personal bankruptcy and business bankruptcy (except in the case of a corporation). While both of these are more expensive to file for than chapter 7, if you do qualify, they certainly will be worth it, as you will be able to retain your personal belongings, and your business, if you own one.

Note: in the case of chapter 13, the records of your bankruptcy stay on your credit report for 10 years, which can make taking out a loan a difficult proposition. However, if that's what you have to do, than that's what needs to be done. Hopefully this info on the types of bankruptcy will help you know which is the right choice for you.