01 Dec Types Of Bankruptcy
Bankruptcy is usually a rest resort for those who are facing an ever growing mountain of debt. Unfortunately though, there are many people who decide to take the bankruptcy option with realizing the problems that they will face in the long term. There are many different types of bankruptcy but the three main types are liquidation, reorganization and a wage earners plan.
This form of bankruptcy is what people generally think of when talking about individual bankruptcy. When this happens, the court usually appoints a bankruptcy trustee whose man task would be to administer a bankruptcy estate. A part of the property will either be liquidated or sold in order to pay off creditors. In order to qualify for liquidation, borrowers must go through a detailed examination of their finances that includes income, living expenditure as well as the overall debt picture. If it is validated that the borrower is eligible for liquidation, all the debts are discharged.
This type of bankruptcy is usually aimed at helping businesses restructure debt. The main aim of reorganization is to help the business regain profitability. In order for this to happen, debtors have to renegotiate leases and contract in order to have them discharged or partially repaid. In such cases, creditors are usually open to negotiations as because otherwise, they wouldn’t get paid at all. This form of bankruptcy is not restricted to the size of the business as there are no limits to the amount of debt that can be reorganized.
Wage Earners plan
This form of bankruptcy allows for a part of the pending debt to be repaid as part of a structured repayment plan. There are many prerequisites for someone to be eligible for a wage earners plan. During the 3 to 5 year repayment plan, borrowers have to attend credit counseling and are protected from collection actions. The best part about this plan is that the homes of the borrowers are saved from foreclosure.