Types of Bankruptcy 7.1 Assignment
Edward Lee Brown
ITT Technical Institute
3 November 2012
Types of Bankruptcy
Although bankruptcy is complicated and the exact steps can vary from state to state, each chapter of bankruptcy uses the same terminology and follows the same basic process. Two main parties are involved in bankruptcy filings -- the debtor and the creditor. The debtor is the party who has debt, or owes money, to the creditor. A debtor can be a company or an individual. The creditor is an organization or company that claims the debtor owes property, service, or money. Most bankruptcy cases involve several creditors. The purpose of this document is to explore Bankruptcy. Debtors can have two different types of debt -- secured and unsecured. With secured debts, creditors have the legal right to something of yours if you fail to make the proper payments. Your mortgage, for example, is a secured debt. By loaning you the money to pay for your house, the bank gets a lien on it. If you stop making mortgage payments, the bank can foreclose and take possession of your house. In business, secured debt can get very complicated. Various business loans may give creditors a lien against intangible aspects of the business, such as patents, trademarks or intellectual property. The creditor can still repossess property that has a lien against it, even if some portion of the debt has been discharged -- secured debt can't ever be fully discharged. The debtor can either make the payments and keep the item, or stop paying on the debt and have the item repossessed. Secured creditors are always paid first in a bankruptcy settlement. Types of Bankruptcy
The types of bankruptcy are named for their respective chapters in the United States Bankruptcy Code. The type of bankruptcy that you file depends on several factors, including whether or not you are an individual or part of a corporation. There are six types of bankruptcy under the...