subject: How To Determine The Cost Of Bankruptcy [print this page] How To Determine The Cost Of Bankruptcy How To Determine The Cost Of Bankruptcy
When your financial situation becomes such that there is no other viable way out of debt, bankruptcy may be the only solution.
Due to the cost of bankruptcy, the method should only be initiated as a last resort. In addition to the financial costs of bankruptcy, there are also long term effects on the credit rating.
The following gives frank information concerning the cost of bankruptcy.
Chapter 7
Chapter 7 Bankruptcy is designed for individuals or couples wanting a fresh start. It is the most difficult to qualify for, but the fastest way to discharge all debt.
In order to file a petition with the court, a test, called a means test, will have to be taken. This is to prove or disprove the ability to pay back the debt owed in a timely manner, if an alternative scheduled could be acquired.
The entire process takes approximately three to four months. A word of caution: the home and/or car are not always able to be retained and may be used as part of the liquidation
Chapter 11
This form of bankruptcy is suitable only for businesses. It is one of the hardest forms of bankruptcy to file and one of the most expensive.
The petitioner will need to provide two different types of documentation to the court.
First, a repayment plan must be submitted to the creditors within a specified time frame. Second, there is a requirement to prove that money is available to repay the debts and hence follow the plan. Creditors have the right to reject this plan if it does not prove adequate.
Chapter 13
Today, the Chapter 13 Bankruptcy is the most common petition filed by individuals or couples. It is generally the quickest of all forms. Chapter 13 bankruptcy prevents loss of all assets that would occur in a petition for Chapter 7.
The individual will submit a plan with the petition to make timely payments over the next three to five years. Generally, payments of 10 cents on every dollar outstanding are accepted. In other instances, it may be as high as 50 cents to the dollar owed.
