People in a substantial amount of debt often seriously consider bankruptcy. There are various factors, such as the amount of debt they’re in, or the types of debts they’re hoping to discharge, that will help determine which type of bankruptcy they may file. Different types of bankruptcy include:
Chapter 7 bankruptcy
For someone looking to start fresh and with a clean slate, Chapter 7 bankruptcy might be the best option. There are some disadvantages to consider, such as a lower credit score and loss of assets, which are sold to satisfy unpaid debts. But by declaring Chapter 7 bankruptcy, filers are often able to discharge most, if not all, of their debts. However, not everyone is eligible for Chapter 7 bankruptcy. In order to qualify, a debtor must pass a “means test,” which includes income limits. The formula for passing a means test varies by state.
Chapter 9 bankruptcy
This type of bankruptcy is not for individual filers. Chapter 9 bankruptcy is designed specifically for municipalities, such as towns, villages, cities, counties, and so on. This type of bankruptcy allows for the filing organization to restructure their debt without the liquidation of assets.
Chapter 11 bankruptcy
Chapter 11 bankruptcy is often viewed as the most costly and complex types of bankruptcy, but is sometimes necessary in certain situations. This type of bankruptcy is usually filed by partnerships and corporations, and allows businesses to settle their debts, but gives them adequate time to do so.
Chapter 12 bankruptcy
Chapter 12 bankruptcy is an exclusive type of bankruptcy that only family fishermen and farms may potentially qualify for if they’ve fallen behind on loan payments. In order to be eligible, applicants must meet certain requirements, which include income minimums and total debt limitations.
Chapter 13 bankruptcy
Along with Chapter 7 bankruptcy, Chapter 13 bankruptcy is another common type of bankruptcy for individual debtors. Unlike a Chapter 7 bankruptcy, a filer can still keep their assets in a Chapter 13 filing, but must repay their creditors over a three to five-year period, and must meet certain income requirements to prove they can feasibly do so.
If you may have thought about declaring bankruptcy, but you’re receiving long-term payments from a structured settlement, you may want to re-consider. Filing for bankruptcy is a serious step that can have long-lasting negative credit effects. As a structured settlement payment stream recipient, you may have other options and you don’t necessarily have to stick to a periodic payment schedule. In fact, you may qualify to sell your future payments and receive your money upfront, in the form of a lump sum. Just imagine what you could do with your lump sum payment—you can pay off debt, catch up on bills, and possibly avoid bankruptcy altogether. Contact Peachtree Financial Solutions today to learn more about selling some or all of your future payments and receiving your money in the form of a lump sum payment.
Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.