When meeting your financial obligations or repaying your debts becomes unmanageable, filing for bankruptcy is one of the most promising options you may have to help you get rid of debt. It can also help protect you property against foreclosure, help reduce pressure or harassment from creditors, and among other benefits, help you get a fresh financial start. However, there are various types of bankruptcy as far as federal law is concerned. In order to determine which one is more ideal for you, it is important to familiarize yourself with each of them in brief. Below are the most common, “3 Types of Bankruptcy: Chapter 13, Chapter 7 & Chapter 11” that you might want to know about.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is also sometimes referred to as the financial reorganization Bankruptcy. It is mostly used by people who are employed or have a regular stream of income but wish to reorganize their financial obligations. Filing for bankruptcy under chapter 13 enables the debtor to come up with a debt repayment schedule proposal or strategy to clear their outstanding debts in a manner that is more favorable and manageable to them. With the court’s assistance debtors are able to regularize the amounts overdue on their property debt or mortgage loan repayment. In most cases, however, the chapter 13 bankruptcy is only suitable for sole owners and individuals as opposed to corporate. It is a preferable option than chapter 7, but also has more limitations when it comes to qualifying.
Under Chapter 13 bankruptcy, the debtor gets to retain possession of their property but repays part or all their debts within a time-frame of 3-5 years. The debtor doesn’t have to surrender their properties to pay the creditors, unlike in chapter 7 bankruptcy. The debtor must also demonstrate or provide proof of repayment ability under the new plan, which demands that they have a regular income that is considered sufficient to meet the new obligations. If the income is irregular or too low, the individual may have to opt for chapter 7 bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is sometimes also known as the liquidation bankruptcy and can be suitable for debtors who completely want to get rid of their debts. Under chapter 7, your debts may be discharged in full, though some of your property may have to be liquidated to pay part of your debts to the creditors. The Chapter 7 bankruptcy is normally used by people whose main goal is to free themselves totally from out certain financial obligations and debts. Business partnerships or corporations that want to liquidate or shut their operations may also be eligible for chapter 7. However, commercial entities may not be entitled to a full debt discharge.
Chapter 11 Bankruptcy
A chapter 11 bankruptcy is mostly used by corporations that run into financial burdens that tend to be unmanageable. The sole purpose of this filing is to seek debt relief. During the filing process under chapter 11, the corporations may continue with their commercial operations, under the guidance of a bankruptcy court. This means that the court takes control of the major decisions of the company, including matters revolving around sale or purchase of assets, leases, rents, business expansions, company deals, and other matters of business operations. The company, on the other hand, is charged with the responsibility of reorganizing their finances in order to meet their financial obligations or repay their debts over a specified period of time.
Find a Professional Bankruptcy Attorney
To find out more about your debt relief options, the type of bankruptcy you qualify for, and what is involved in the bankruptcy filing process, you need assistance from a professional legal representative. They are a professional and cost-effective law firm with reliable expert bankruptcy attorneys you can depend on to get a fresh financial start and forget about your debts.