Bankruptcy
What happens when you have overwhelming debts and can’t find any way to pay off your debts or even service your debt (by making the minimum monthly payments), what do you do?
The United States Bankruptcy Code allows for honest, regular people to have relief from your debts. There have been changes to the bankruptcy code in recent years, which are aimed at preventing people from getting a “free ride” and abusing the bankruptcy code. But, for regular people, who are overwhelmed with health care expenses or overwhelming credit card debt, bankruptcy is still a good option.
There are two types on bankruptcy which regular people can use to make their expenses more affordable and get a fresh start.
Chapter 7
This is the preferable way to file bankruptcy for most people. Under this plan, a debtor does not need to repay any of the debts he or she has accrued. Instead, all the debts get discharged. Filing bankruptcy does make it difficult, if not impossible, to get new credit for a period of time. But, it can offer relief for people who are overwhelmed by debts which they can’t see any way of repaying.
Chapter 13
Many people who may not qualify to file a chapter 7 can file for a chapter 13 bankruptcy. In this plan, the debtor repays a portion of his or her debts over a period of 5 years. There are rules, and the debtor can’t miss any payments during the 5 years. However, at the end, much of the debt the debtor has accumulated prior to filing bankruptcy is discharged. In fact, this kind of bankruptcy affords the debtor the “golden discharge” at the end of the plan.
Chapter 11 and 12
These types of bankruptcy are designed for businesses and farmers. Therefore, they are not widely applicable to regular people.