Types of bankruptcy according to federal bankruptcy act no comments
Bankruptcy depends on laws and procedure. There are several types of bankruptcy procedures, each of these procedures are known by Federal Bankruptcy Act according to the title in which they appear. Each title or Chapter contains their own set of laws, acts and rules. Chapter 7 and Chapter 13 are most common type of bankruptcy titles widely known. Detailed descriptions of these chapters are as follows-
Chapter 7 of federal bankruptcy act
Chapter 7 of federal bankruptcy act is one of the popular types of Bankruptcy Help title used not only by individuals, companies, but may also be used by many businesses. Chapter 7 of bankruptcy act is most severe. Under act of Chapter 7, a court may appoint an official trustee to collects individual’s cash, assets, etc. The trustee then sells those assets for cash to pays legal proceeds to individual’s liabilities and creditors. Some of the assets which are exempted under the federal or state law cannot be used to pay off liabilities of proprietor have to be liquidated. Once after the completion of Chapter 7 process is done the filing process cannot be repeated again for the period of next six years.
Chapter 13 of federal bankruptcy act
Chapter 13 of federal bankruptcy act is designed for such individual debtors who have steady source of generating income. However, it can also be applied for small businesses. As per the rules of Chapter 13 plan, which is also called “individual reorganization,” debtor must clear all his debts from three years to a period of five years.
Other types of bankruptcy according to federal bankruptcy act
Chapter 11 of federal bankruptcy act especially targeted to large businesses, but it is also applicable to individual business and sole proprietors. Chapter 11 sounds similar to Chapter 13, but it has certain more requirements as compared to Chapter 13 Bankruptcy. However, no doubt all debtor needs to pay off debts, then Chapter 11 or Chapter 13 are advisable as compared to Chapter 7, particularly in case when they try to reestablish their own creditworthiness.
Chapter 12 is less cheap than chapter 11. It facilitates debtors to pay his creditors and debenture holders in parts or proportionately. Chapter 13 focuses on small businessmen which have regular source of income like family of fishermen, shopkeepers, etc. Generally, the plan under chapter 12 of bankruptcy act must provide payments over the period of three years.