For anyone who is considering bankruptcy, one of the most important places to begin is by learning more about the types of bankruptcy which are available. Which types of bankruptcy even apply to you, and what’s the difference between all of these different variations? Let’s cut through some of the legal clutter here and start by explaining the differences between Chapter 7, Chapter 11 and Chapter 13 bankruptcy proceedings.
Chapter 7 is the most logical place to start. It’s what most people are likely familiar with when they think about bankruptcy. With a Chapter 7 bankruptcy filing, you cancel your debts entirely, hopefully all of them, but in many cases, the large majority of them.
A consequence of this is that your property is often sold or liquidated. This is to pay off some of those creditors in full, or partially. You’ll have certain property which is exempt from this, but you’re going to lose a lot of your possessions. It’s the path which offers the cleanest slate, but also the harshest repercussions.
Next, let’s examine a Chapter 13 bankruptcy. Here, you develop a payment plan spaced over a period of from three to five years. This allows you relief from multiple creditors and the interest rates, and payment amounts you were facing. If you have a steady income which is substantial enough to allow for a particular plan, then you get to pay things off via this new plan instead, and you’re able to keep your property, such as your home.
Now, let’s move back to Chapter 11. We skipped over it because this form of bankruptcy is typically utilized for businesses, including corporations and partnerships. It’s known as a reorganization bankruptcy
By filing Chapter 11, business owners hope to be able to keep the business alive, viable and in operation. Certain debts can be eliminated, and the business can stay in operation. Assets can even be sold, and it’s all to essentially balance the business’s income and expenses, to actually gain profitability, stay open, and pay off further debts.
Hopefully you know more about the basics here, and the difference between different chapters of bankruptcy. Before moving ahead, always speak with an experienced attorney in your local area who can guide you through the process, determine the best course of action, and produce a successful outcome for you. There may even be non-bankruptcy solutions available to you, helping you avoid filing bankruptcy at all.