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Welcome to The Bankruptcy ORG - What is Bankruptcy?

Bankruptcy is when an individual (or organization) has legally declared inability or impairment of ability to pay their creditors. A declared state of bankruptcy can be requested or initiated by the bankrupt individual or organization, or it can be requested by creditors in an effort to recoup a portion of what they are owed. However, in the overwhelming majority of cases, the bankruptcy is initiated by the "bankrupt" individual or organization.

Bankruptcy is a VERY large decision that should be carefully evaluated! The impact to your credit will be devastating, but if you need to file bankruptcy you can recover.

Types of Bankruptcies

There is more than one type of bankruptcy. The two main types of bankruptcy are Chapter 7 and Chapter 13.

  • In a Chapter 7 proceeding, you are allowed to keep your exempt property, such as much of the equity in your home. Most of your other debts, such as money owed on credit cards, are discharged.
  • Chapter 13 Bankruptcy is a type of consumer reorganization bankruptcy filing that allows the consumer to pay off creditors within a specific time period of three to no longer than five years. This is also referred to as a "wage eamer" plan.

Chapter 13 is generally preferable for most people as it allows the defaulter to hold at least some property. It is imperative to understand that a bankruptcy does not remove all your debts overnight. Alimony, income taxes, child financial support and student loans are not exempt from bankruptcy proceedings.

Other types of Bankruptcies include:

  • Chapter 12. Bankruptcy filing reserved for working ranches, farms, etc.
  • Chapter 20. Ploy used by some bankruptcy attorneys to delay a foreclosure of real property by filing a Chapter 13 petition, then quickly converting the filing to a Chapter 7.

 


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This document does not contain legal advice. The Author/Copyright Holder is not your lawyer, and the techniques described here may not be appropriate to your situation. You are strongly advised to obtain competent legal counsel before taking any actions which may have legal consequences, but should you fail to do so, you are responsible for understanding the materials and sources cited. If you do act upon the suggestions contained in this document, you are responsible for yourself and your actions, and you have the burden of diligence for your actions (know what you're doing).

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