Bankruptcy is an extreme financial move taken by individual after exhausting all other options. It is a move that tends to give an individual another opportunity to reorganize his financial base.It entails court protection from creditors who are seeking to have their money back while at the same time enabling the creditors seize some of your property or renegotiate your payment plan.

There are two common types of bankruptcy that can be filed: chapter 7 and chapter 13.chapter 7 gives a debtor an opportunity to emerge out of a financial crisis and start afresh whereby all non-exempt property of a debtor is sold and the proceeds distributed to the creditors. It is relatively faster to finalize compared to chapter 13. In some cases the debtor has no assets to loose hence giving him a quicker fresh financial start.

This liquidation is the most common form of bankruptcy filing since it is a faster method of reorganizing financially. It is even faster especially when there are no objections fro the parties involved in the filing. Most of the debts are always dealt with in this method soon after successful filing by an attorney. The advantage of this method is that a debtor can continue paying for a mortgage after signing a reaffirmation agreement.

Chapter 13 on the other hand gives an individual the opportunity to repay some of or all his debts under his name in better terms. These terms can be lower interest rates or no interest rates at all. An individual gets a chance to restructure his debts by devising methods that he will be able to pay his creditors with. Unlike chapter 7 where you certainly loose most of your assets, your property is retained. Chapter 13 is however a slower process compared to chapter 7 and also suitable to individuals who earn regular income.

The debtor is given a grace period of 5 years to pay the debts under the supervision of the court. In this plan a written structure of how the debt will be cleared is written down as well as the duration that the payment will take. The creditors are also restricted by the court to put any claims on their money during this payment period.

An individual can be declared bankrupt either voluntarily or involuntarily. Voluntary declaration involves an individual initiating the proceedings after realizing that he is not able to honor his debts. The debtor can also be forced into submitting after a creditor with a strong base files for the same. Once the application has been accepted, you have no otherwise but to co-operate fully with the court and the parties involved.

The implications of liquidation are many, and they include the loss of some or all of your assets. People who are declared bankrupt mostly loose their credit cards and their public image is sometimes tainted by publishing. You cannot practice is some professional jobs such as chartered accountant or be a director of a company. Individuals are sometimes not allowed to trade using other names unless they send notifications to the other concerned parties.

Liquidation should always be chosen as the last option after unsuccessfully trying other options like selling your assets. Before choosing which type to apply for, it will be prudent to discuss the matter with a liquidation attorney for advice.

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Category: Finances
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