Different Types of Bankruptcy Laws

Bankruptcy is a federal court process designed to help consumers and businesses eliminate their debts or repay them under the protection of the bankruptcy court. Bankruptcies can generally be described as liquidation or reorganization.

A first time bankrupt with debts will generally receive their discharge one year after the date of the bankruptcy order (there is the possibility that in some cases the bankruptcy discharge period will be less than one year). There are four different types of bankruptcy: Chapter 7, Chapter 11, Chapter 12, and Chapter 13 law, the most common of which are Chapters 7 and 13.

1) Chapter 7 (Straight Bankruptcy)

In a bankruptcy case under Chapter 7, you file a petition asking the court to discharge your debts. The basic idea in a Chapter 7 bankruptcy is to wipe out, or "discharge," your debts. In rare instances, you will need to give up property except for "exempt" property which the law allows you to keep. In most cases, all of your property will be exempt. But property which is not exempt is sold (or replaced by cash from you, if you wish to keep it and have the money) with the money distributed to creditors.

If you want to keep property like a home or a car and are behind on the payments on a mortgage and the lender will not work with you, then a Chapter 7 case probably will not be the right choice for you. That is because Chapter 7 Washington bankruptcy law does not eliminate the right of mortgage holders or car loan creditors to take your property to cover your debt.

2) Chapter 11 Bankruptcy Law

Chapter 11 is also termed as Reorganization and is directed for reorganization of a business and also for some consumer debts. However the provisions of chapter 11 bankruptcy are too hard to understand without the attorney beside.

3) Chapter 12 Bankruptcy Law

This bankruptcy is limited to fishermen and farmers. In a way it is similar to chapter 13 bankruptcies where the person with debts is allowed to pay the creditors in some duration of time from future earnings. But the income of the debtor should be only from a farm owned by his family or a commercial fishing operation.

4) Chapter 13 (Individual Debt Adjustment)

In a Chapter 13 case you file a "plan" showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a Chapter 13 case is that it will allow you to keep valuable property -- especially your home and car if you are behind on payments -- which might otherwise be lost, if you can make the required payments. Your Chapter 13 plan payments will be at least enough to pay your past due mortgage payments, a percentage of your unsecured debt, and the trustee commission of about 11% of all plan payments. You must also make all future mortgage and car payments, in addition to the plan payments, if you wish to keep the property or car. The most important thing about a Chapter 13 case is that it will allow you to keep valuable assets which might otherwise be lost if you can make the required payments.

Planning for filling bankruptcy law