Bankruptcy is a recent concept in history
Some countries even today do not allow an individual or business to file bankruptcy. We’re going to take a look at how bankruptcy originated, what it can and can’t do, some of the most common types, and the differences between them. If you or someone you know is in a position to need bankruptcy read this article and make an informed decision on your choices.
The word bankruptcy comes from the Italian phrase “banca rotta” this means broken bench. Before there was a concept of bankruptcy or insolvency, it was common for “debtors” the person who owes money to be put into debt slavery. Some debtors had limits to the amount of time they could be in debt slavery and others found themselves working for their creditor for the rest of their lifetime. The first English law referencing bankruptcy was the Statute of Bankrupts which originated in 1542.
There are limits on what bankruptcy can and can’t do for the person who is filing. Bankruptcy can stop collection agencies from contacting you and harassing you. Bankruptcy can eliminate all unsecured and all credit card debt. Bankruptcy can eliminate certain types of liens. Certain types but not all types of bankruptcies can force creditors to negotiate a payment plan with you or how to patent an idea, instead of repossessing or foreclosing on your assets. What bankruptcy can’t do, however, is eliminate child support, alimony payments, tax liens or student loan debt. Bankruptcy also does not stop creditors from repossessing or foreclosing on your property in all cases.
Chapter 7 bankruptcy is by far the most common form of consumer bankruptcy. Let’s take a look at what chapter 7 bankruptcy can do for you. Chapter 7 allows you to eliminate a wide variety of debts in a short time for few costs. Also known as a liquidation bankruptcy, your assets can be put to sale to pay off your obligations to your creditors. Essentially you are putting your assets and debts in the hands of the court for them to decide how best to pay off existing creditors while at the same time allowing you to keep what is exempt from bankruptcy under your state laws. The whole process can take as little as three to four months and only require one trip to the courthouse, offering a quick restart for debtors in over their head.
The chapter 13 bankruptcy is the second most common form of consumer bankruptcy and it allows for the repayment of all or part of the debts that are owed. The chapter 13 bankruptcy is a much more involved and lengthy process than chapter 7, however you get to keep your assets and make payments to creditors over a three to five year plan. The bankruptcy proceedings will specify which debts take priority over the other ones and stipulate whether you have to pay in full or in part. If you are unable to complete your payment plan due to a change in income, you may be granted a change to chapter 7 or have your debts waived due to hardship.
The chapter 7 bankruptcy is the most common but it is not always the one that will best suit your needs. Make sure that you choose the bankruptcy that is right for your situation and that you thoroughly delineate all debts that will be covered in the proceedings. Be aware of all requirements that will be placed on you or get more information on how to properly file your bankruptcy.