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Some Facts Regarding Chapter 13 Bankruptcy

By Bob Tremerituus

Although things may be slowly improving, the world economy is still on a knife edge right now and businesses are still finding trading conditions tough. Many people have been made redundant in the past year, and when this happens there is always a corresponding increase in the number of people who file for bankruptcy.

Bankruptcy is open to both companies and businesses, and the two most common forms of bankruptcy are chapter 7 and chapter 13. Chapter 13 is often preferred by business, as it allows the company to carry on trading, if it is found that it is likely to have a long term future, despite its short term financial difficulties. A chapter 7 banktuptcy on the other hand, means that all assets are liquidated, preventing any form of continued trading.

However, not everyone wants to file under chapter 7 and lose everything, including their credit rating. OK, a credit rating is badly affected by a chapter 13 bankruptcy too, but not as badly as a chapter 13 which stays on ones credit record 2 years less than a chapter 7 bankruptcy.

A business can therefore trade its way out of its financial problems, without having to sell stock or equipment.

This is because the bankruptcy court will have agreed what is called a “repayment plan”. This is a schedule of repayment over 3-5 years, depending on the court and agreed with the creditors. The individual or business is then protected from their creditors and can concentrate on getting the business, or the individual’s personal financial affairs, back on track.

Once a chapter 13 bankruptcy has been agreed and implemented, the individual or business is then protected from their creditors, who may not then chase for payment.

It used to be that people and businesses would file for chapter 7 as an “easy option” to become debt free in one fell swoop. However, a means test is now used to ensure that anyone who can afford to repay their debts, with a little reorganisation of that debt, does so. If it is found that they can, then they have to enter a repayment plan under a chapter 7 filing.

Although it all sounds very easy, bankruptcy should be avoided at all costs, as it brings it’s own set of fiancial difficulties later.

Before declaring yourself bankrupt, it’s vital that you consult with professional adviser regarding your financial position. This is because declaring yourself bankrupt has severe implications for you credit score and general financial position in later years.

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Article Citation
MLA Style Citation:
Tremerituus, Bob "Some Facts Regarding Chapter 13 Bankruptcy." Some Facts Regarding Chapter 13 Bankruptcy. 5 Jul. 2010. 4 Nov 2014 <>.

APA Style Citation:
Tremerituus, B (2010, July 5). Some Facts Regarding Chapter 13 Bankruptcy. Retrieved November 4, 2014, from

Chicago Style Citation:
Tremerituus, Bob "Some Facts Regarding Chapter 13 Bankruptcy"

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