What are the different types of bankruptcy?
Bankruptcy is a legal procedure that allows an individual or business to reorganize or liquidate their assets in order to pay off their creditors. In the state of Texas, bankruptcy is governed by federal law, and is regulated by the U.S. Bankruptcy Code. There are several different types of bankruptcy that can be filed depending on individual or business financial situations. Chapter 7 Bankruptcy is the most common form of bankruptcy, and is also known as liquidation bankruptcy. Under this type of bankruptcy, a person’s assets are sold off in order to pay off creditors. However, certain assets are exempt from liquidation, including some types of property and resources. Chapter 13 Bankruptcy is commonly known as a debt restructuring bankruptcy. Unlike Chapter 7, the person filing is not required to liquidate their assets. Instead, they can enter into a repayment plan that allows them to make reasonable monthly payments for a period of 3 to 5 years. Chapter 11 Bankruptcy is typically used by businesses and is also known as reorganization bankruptcy. This type of bankruptcy allows businesses to rework their debt agreement with creditors in order to continue operating. Finally, Chapter 12 Bankruptcy is reserved specifically for family farmers. Through this type of bankruptcy, family farmers are allowed to restructure their debt in order to save their farms. Although bankruptcy can be a difficult process, it can provide financial relief and a fresh start for those dealing with overwhelming debt. In Texas, the filing process and the different types of bankruptcy are handled according to federal bankruptcy law.
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