Overview of Bankruptcy

Bankruptcy is one way to potentially get out from under your debt. Unfortunately, it leaves a long lasting scar, and comes at a high price - financially, emotionally, and socially. It is a long and painful process and the Overview of Bankruptcyrepercussions can last for over a decade.

The financial impact is severe; a bankruptcy will stay on your credit report for 7-10 years. Every time you apply for credit, whether it is a home, a car, a lease, or insurance, you may be impacted. The long-term effect of higher rates may greatly outweigh the shorter-term impact of filing bankruptcy.

Additionally, most people do not realize that bankruptcy can stay on their court records for over 20 years - which means it can follow someone for the rest of their life. If you apply for a job, a loan, rent an apartment, or even insurance your bankruptcy filing may be easily uncovered.

Lastly, we have yet to find someone who is proud of filing bankruptcy. Most people will do anything to avoid filing bankruptcy, and for many of our clients, NDR’s Debt Relief Program is a perfect alternative.

Bankruptcy is not an easy or even quick fix. It is a very serious decision with serious consequences. If you are considering bankruptcy, you should contact a lawyer to discuss this option.

NDR’s “Debt Reduction Program” is by far the best alternative to bankruptcy. Our team of professional negotiators has one goal - to make your creditors accept our settlement amounts as payments in full, making you debt free without having to suffer the longer-term financial, emotional, and social impacts of a bankruptcy.

Bankruptcy Types

In the United States, bankruptcy is available for businesses or individuals who cannot afford to pay their debt. United States bankruptcy laws are defined in Article 1, Section 8, Clause 4 of the U.S. Constitution, which gives the U.S. Government rights to enforce “uniform laws on the subject of bankruptcies throughout the United States.”

There are basically two types of bankruptcy that a person can file in order to excuse their debt from a creditor. They are a Chapter 7 bankruptcy and a Chapter 13 bankruptcy.

In a Chapter 7 bankruptcy you are asking the court to completely eliminate all of your unsecured debt. In the U.S., there are five chapters of bankruptcy, each of which coordinates a different type of debt with varying solutions. The five chapters of bankruptcy are:

  • Chapter 7: This is the most commonly filed chapter of bankruptcy in the United States. Chapter 7 creates laws regarding liquidation - the sale of a business or individual’s assets in order to raise money to pay off debt. After Chapter 7 bankruptcy is filed, all nonessential or exemptible material is awarded to a third party trustee, who is responsible for liquidating these assets until debt can be paid. Chapter 7 is one option when involuntarily assigned bankruptcy.
  • Chapter 9: Available only to municipalities, this chapter is used to help restructure the debt of cities, counties and states. This chapter was famously used in 1994 by Orange County, California to relieve over $1.5 billion in debt.
  • Chapter 11: Chapter 11 bankruptcy is available to all businesses and individuals in the United States, but is primarily used by corporations. While Chapter 7 requires a third party trustee to coordinate liquidation, Chapter 11 allows debtors to maintain control of their assets and restructure in order to raise money to pay any debt owed.
  • Chapter 12: This chapter of U.S. bankruptcy code is available only to farmers, fishermen and their families. Chapter 12 was created in 1986, and was initially supposed to expire in 1993, but was continually expanded until being made permanent in 2005. Aside from its higher debt ceilings and more exemptions, Chapter 12 is very similar to Chapter 13.
  • Chapter 13: Bankruptcy This chapter is designated for individuals, and requires debtors to reorganize their assets under supervision of a bankruptcy court. Bankruptcy court will provide the debtor with a rehabilitation program to pay back debt owed over time.