A Bit About Bankruptcy
Updated: Feb 3
If you are having some financial trouble, you may be considering filing for bankruptcy. Before you make this decision, take a few moments to understand the implications and impacts that this will have on you and your family. Consider scheduling an appointment to sit down with a professional that will be sure to file everything correctly for you. There are six different kinds of bankruptcies to compare. It is important to select that one that will pertain the most to your certain situation.
Chapter 7 – Liquidation Bankruptcy: A Chapter 7 bankruptcy is the most prevalent. It is commonly called liquidation or straight bankruptcy. Any valuable assets you have will be sold to pay off your creditors. You can negotiate to keep your home, vehicles, and retirement funds as they are deemed as necessities. Almost anything else is fair game as it pertains to settling financial obligations. After the liquidation, any unsecured debt you have leftover can be erased in most cases. Still, several types of debt, like student loans and taxes, cannot be forgiven in the issue of bankruptcy. This type of bankruptcy can be helpful to those with a high amount of debt, like credit cards or medical bills.
Chapter 13 – Repayment Plan: A Chapter 13 bankruptcy is considered a repayment plan because it works to reorganize your debt rather than erase or forgive it. Courts will work to approve a monthly payment plan that will run the course of three to five years. The goal is to pay off a portion of your debt. Unlike with a Chapter 7 bankruptcy, a Chapter 13 lets you keep your assets and can even stop a pending foreclosure.
Chapter 11 – Large Reorganization: A Chapter 11 bankruptcy is utilized for businesses or corporations similar to the way Chapters 7 and 13 are used for individuals. In Chapter 11, a plan is organized to allow the company to continue operations while settling debts. While courts decide on individual bankruptcies, creditors must also be included in the approval process for a Chapter 11 bankruptcy. Some individuals, such as a celebrity or real estate investor, may choose to file under this kind of bankruptcy when they have a large number of assets and properties.
Chapter 12 – Family Farmers: A Chapter 12 bankruptcy is another kind of bankruptcy filed for by individuals rather than large organizations. Family farmers and fishermen can avoid foreclosure and asset liquidation while making payments on their dates. This makes Chapter 12 like Chapter 13, only Chapter 12 involves higher debt limits. It gives these kinds of individuals more flexibility in their unsecured credit repayments.
Chapter 15 – Used in Foreign Cases: Chapter 15 bankruptcies are used in foreign cases that involve debt within the United States. They allow foreign debtors the chance to work with U.S. bankruptcy courts in similar ways that individuals and companies here in the U.S. can.
Chapter 9 – Municipalities: Another less common type of bankruptcy is Chapter 9, which relates to municipalities. Chapter 9 bankruptcies are reserved for cities, towns, school districts, and other forms of local governments.
If you have questions or concerns pertaining to your financial responsibilities, it’s important to work with an experienced professional who can determine if you should file for bankruptcy. They’ll work with you to select the right type that will best help you achieve your goals.