BankruptcyIf a judgement is made where the debtor is forced to pay but can't, bankruptcy may be the only option. For consumers, there are mainly two types: Chapter 13 which is reorganization for individuals and Chapter 7 for liquidation. If there is only a small debt, it might be possible to work something out without bankruptcy. If the debtor is able to repay the debt, Chapter 13 might be the better option instead of Chapter 7. With Chapter 13, the debtor has to formula a repayment plan to payback the creditor. With Chapter 7, the debtors assets are sold and the proceeds are given to the creditors. The debtor, however, can claim bankruptcy exemptions in order to keep some property or belongings. Some states allow homestead exemptions for a house or other residence. When the property has been liquidated, all remaining debts are then discharged. One advantage to using bankruptcy is that the debtor is granted an automatic stay. This causes all lawsuits against the debtor to cease. Creditors can no longer attempt to collect the debt. It remains in effect until the bankruptcy proceedings have ended. Bankruptcy also has disadvantages, namely, the credit report listing. A bankruptcy can stay on a credit report for up to 10 years for Chapter 7. |