Filing for bankruptcy is a complicated procedure. Because of this, it’s important you do it correctly and invest in the help of bankruptcy attorneys. To help give you direction in filing for bankruptcy, this article is going to provide an overview of the most common types of bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy, or liquidation, is the most commonly filed form of bankruptcy. After filing this type of bankruptcy the debtor is allowed to start fresh. When a Chapter 7 Bankruptcy has been filed, a trustee then collects the debtor’s nonexempt assets. These assets are then reduced to cash in order to be distributed to the creditors. Most debtors who file this type of bankruptcy are released from their personal liability for certain debts. If there are no cosigners involved, and there is no hope of paying off the debt, Chapter 7 Bankruptcy may be a suitable option.
Chapter 11 Bankruptcy
Commercial businesses that want to continue business operations while repaying creditors may choose to file Chapter 11 Bankruptcy. Through this type of business bankruptcy, the business must follow a court-approved payment and reorganization plan. Under Chapter 11 Bankruptcy, the debtor may file a plan of reorganization within 120 days after the order for relief. The creditors are allowed to evaluate the reorganization plan before court approval. When the plan is completed, the debtor will have gone through a process of becoming a stronger, more organized business.
Chapter 12 Bankruptcy
Chapter 12 Bankruptcy claim provides debt relief to family farmers who have regular annual income. This type of bankruptcy allows debtors to propose a plan of repayment for a period of three to five years. Additionally, a trustee is assigned to the case to oversee the bankruptcy process. The family farmer is then allowed to continue running the farm while the bankruptcy plan is being followed.
Chapter 13 Bankruptcy
For those who have a regular source of income but are unable to currently pay back their debts, Chapter 13 Bankruptcy may be an option. This type of bankruptcy typically allows the debtor to keep a valuable asset instead of selling everything. The debtor has the option to come up with a repayment plan and propose it to the court. The plan should show how the debtor is going to repay their debt over three to five years. If the court approves the repayment plan, a trustee will be assigned to manage the payments to the creditors.
Today, businesses account for about 3% of bankruptcies, which is significantly smaller than in 1980 when they accounted for 13%. However, no matter if you’re a business owner or an individual, it’s vital to understand the importance of bankruptcy attorneys. Bankruptcy attorneys can advise you on which type of bankruptcy is right for your situation and help you get back on your feet as quickly as possible. Call us today for more information on how our team can help.