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Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
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Table of contents
Ch. 1: Understanding your debt
Ch. 2: Using equity to consolidate debt
Ch. 3: Reorganizing finances
Ch. 4: When to seek debt help
Ch. 5: The bankruptcy option
Here’s a quick run down of the five most common types of bankruptcy:
Chapter 7: Also known as liquidation, allows individuals or businesses to give up nonexempt assets and walk away from most debts. To qualify, debtors must pass the means test — that is, their income must be less than their state’s median income. For more information on means testing, read ” Understanding the new bankruptcy law.”
Chapter 9: This section works like Chapter 11 and allows municipalities to reorganize debt.
Chapter 11: Also known as reorganization, this type of bankruptcy is for individuals and more commonly, businesses to restructure debt. Similar to Chapter 13, in that it allows the filer to draft a plan to repay some debt while retaining assets. Chapter 11 is much more complicated, and therefore expensive, making it financially feasible mainly for businesses and very wealthy individuals.
Chapter 12: Allows family farmers and fishermen with regular income to reorganize debt. It works very much like Chapter 13, but usually stretches out over three years.
Chapter 13: For individuals who need to restructure their debt load. Some creditors will be paid back in full with interest, others in full and the remainder will be repaid a percentage of the debt. Also used by creditors who do not qualify for Chapter 7 under the means test.
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