Personal bankruptcy is not exactly what it seems to most people, and the results are often better than people expect. The concept means different things to different people suffering massive debt. The right type can rescue a family's financial future.
What are the different types of bankruptcies?
Chapter 7 bankruptcy, also known as "liquidation" bankruptcy, involves a trustee selling off a debtor's assets to come as close as possible to settling outstanding debts. Chapter 11 is a reorganization of assets and a negotiation with creditors so a debtor can keep these assets. Some other types include Chapter 12, designed specifically for family businesses, and Chapter 13, designed for people with a regular income.
Who is most likely to file for bankruptcy?
It may be assumed that rich people use bankruptcy when disaster strikes or poor people do so when they attempt to buy their way out of poverty. But employed middle-class individuals are the most likely to file for bankruptcy. The cycle of financial trouble often begins when middle-class earners end up spending out of control or acquiring unmanageable assets.
What are the main causes of bankruptcy?
The largest single cause by far is medical debt, related to unexpected or expensive medical procedures often associated with sudden injury or chronic debt. As a result, financial professionals often recommend that families try to save as much as six months' salary to avoid these problems.
Filing for any type of bankruptcy can be done on your own, but that leaves you on your own as well. A bankruptcy attorney can help people develop a strategy for getting their life back together after financial problems.