Bankruptcy Protection Fact
- Personal Bankruptcy Guarantees Protection from Creditors
- Chapter 12
- Spousal Protections
- Types of Bankruptcy
- Bankruptcy Protection Discharge
Throughout the decades, there have been many laws introduced involving bankruptcy and bankruptcy protection. There are three main types of bankruptcy; each type with its own protections. Bankruptcy can be a very complex, misleading topic, so we’ve done some research and found five facts about the protections surrounding bankruptcy.
1. Personal Bankruptcy Guarantees Protection from Creditors
The most popular options for personal bankruptcy are Chapters 7 and 13. If you file Chapter 7, most of the time debt is eliminated completely. If you file Chapter 13, it usually involves some repayments (but not asset seizures). In either case, laws prohibit creditors from pursuing you legally after you’ve filed for bankruptcy. Once you file and paperwork has been filed, you are protected from the harassment of creditors and are no longer responsible for debt that is owed outside of the bankruptcy agreement.
2. Chapter 12
Chapter 12 is a newer addition to the bankruptcy spectrum, but is specially drafted for farmers and fishermen. This special option allows fishermen and farmers (who make less than $4 million as farmers and $1 million as fishermen) to file a form of bankruptcy that gives them a chance to create a plan to pay back some or all of their debts. Repayment plans are typically set up and are usually required to be paid within 5 years. But Chapter 12 also provides time allowances for farming and fishing’s seasonal nature.
3. Spousal Protections
There are options within the bankruptcy system to file jointly or separately, just like married couples can do with taxes. Even in instances where an individual is filing, the spouse must submit credentials and information as well. According to the U.S. Courts, married couples are required to submit information for both people in regards to bankruptcy, “regardless of whether they are filing a joint petition, separate individual petitions, of even if only one spouse is filing.” After the court makes an assessment of the couple’s financial situation, there are many safeguards in place to protect the assets and credit of spouses.
4. Types of Bankruptcy
There may be three main types of bankruptcies, but there are actually six specific types. Each one is desgiend for certain people or companies and has its own protections. Some Chapters protect a person or company’s assets while others don’t, for example. No matter which Chapter you are going to file, there are a very specific list of requirements. Most people must consult and hire a lawyer who specifies in bankruptcies. In order to receive each protection as outline in the Chapter, you must do each requirement as specified by the court, as the court has the final say in approving bankruptcy.
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5. Bankruptcy Protection Discharge
Each type of bankruptcy filing carries its own rules about how it affects your credits. Chapters 7 and 13 bankruptcy filings stay on your credit for different amounts of time, for example. You will have little to no credit during this time, and then be “discharged” from your bankruptcy. After you have been legally “discharged” you will be able to begin building your credit back up. After being discharged from the bankruptcy, you will be able to find credit (even though interest rates may be a little higher). These rules were adapted so that people would not suffer endlessly after filing bankruptcy.
Filing for bankruptcy is a very complex, serious decision. It can have life-long implications and it’s important to understand what you’re getting into. These five facts about bankruptcy protection can help set you on the right path to understanding bankruptcy and your rights.
