News reports show that even big businesses have gone broke around the world with the disastrous impact of the recession. It’s amazing therefore that even those who are filing for bankruptcy is sometimes unaware of the types of bankruptcy.

Thinking of bankruptcy lightly imagining it to be the easier solution is not a smart thing to do. You should know that there are various methods to stop yourself from as many would call it ‘going broke’. Of course this should be the very last resort. However if you are convinced that you are bankrupt you should learn about the types of bankruptcy to know what would apply in your particular case.

The two common types of bankruptcy are chapter 7 and 13. Chapter 7 bankruptcy relates to a case where it’s quite straight forward. It’s generally referred to as ‘straight bankruptcy’. If you happen to own very little property and has a lot of unsecured debt then this applies to you.

Chapter 13 is the other main component when considering the types of bankruptcy. This is quite different from chapter 7. Within a time period of 3 to 5 years you are expected to pay the total amount of debt or at least a part of it through your earnings. Your secured debt should be less that $750000 and unsecured debt should also be less than $250000.

Most of your debt will be cancelled if you fall under chapter 7 among the types of bankruptcy. However keep in mind that any debt in the form of federal tax bills or child support will have to be paid. Note that in both chapter 7 and 13 bankruptcy it will be mentioned in your credit history and this is one good reason to use it as the last resort.

Chapters 9, 11 and 12 are the some of the other lesser known items in types of bankruptcies. Chapter 9 is only for governmental units and municipalities while chapter 12 is for those who fall under the category ‘family farmers’. Chapter 11 on the other hand is relavent to those individuals with substantial incomes and assets.

The sensitive matter of bankruptcy is one which should not be handled by one with little understanding of types of bankruptcy as choosing the relevant chapter among types of bankruptcy is a vital task that depends on your particular situation.

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With the current economic crises, word such as credit, debt, interest and bankruptcy are not uncommon to us. After the Great Depression in the 1930s the current recession has been the worst financial crisis. Many people ,and still are due to the still ongoing recession. In many cases the losses were so great that they had to file bankruptcy.

Mortgages being defaulted was what intitially led to all these problems. The rising rates of interest were a major cause behind the growing number of people defaulting on their mortgages . This then lead to the credit crunch which left several industries struggling to survive. A major industry that was affected by the credit crunch was the automobile industry. That automobile which relies on credit sales such as hire purchase agreements and leasing, lost a large portion of its revenue and therefore began to crash.

This eventually had a great impact on several other countries. As a result, other countries had similar effects. Rise in the rate of unemployment, increase in prices of goods etc.People all around the world struggled to live as they could no longer afford their mortgages.

Many people in the retirement age, living off pension funds really suffered due to the increase in prices of goods, increasing interest rates on their mortgages and were forced to leave their homes, being left with no choice but to file bankruptcy.

Financial experts say that with careful observation people can easily avoid having to file bankruptcy. The first measure a person can take to prevent having to file bankruptcy is to destroy credit cards. Credit cards are one of the major causes of excess debt. Credit cards promote spending excessively and a majority of the public usuallylose control of their spending habits. This excess spending, results in huge credit bills and evetually results in having to bankruptcy files. Secondly, it is important to stop buying more houses than one can afford. Interest on mortgage payments can be really expensive and in the event of the person not being able to pay, they will either have to give up the house or other securities, or file bankruptcy.

Credit counselling is recommended by many experts as it informs people of their financial status and allows them to make carefuk choices on their credit spending.

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