Bankruptcy is a major decision facing a growing number of Americans. US bankruptcy laws help people who can no longer pay their creditors and allow them to get a “fresh start” by liquidating their assets to pay their debts or by creating a repayment plan. These bankruptcy laws also protect troubled businesses and provide for orderly distributions to business creditors through reorganization or liquidation.
Here is a look at three different types of bankruptcy: Chapter 7, 13, and 11.
Chapter 7 Bankruptcy
This is one of the most common types of bankruptcy for individuals, but may also be used by businesses. When you can’t pay bills like credit cards, medical bills, or loans, Chapter 7 bankruptcy might allow you to be “discharged” of your legal obligations to pay and allow you to get a fresh start.
Chapter 7 is often appropriate when the debts you have for houses and cars are current, but there is no money left from your monthly paycheck to pay other bills. This will allow you an opportunity to get your family back on a budget covered by your earnings.
Filing for Chapter 7 doesn’t mean that you lose everything. You are allowed to keep a certain amount of property.
Chapter 13 Bankruptcy
While this type of bankruptcy is designed for an individual with a steady source of income, it can also be used by small businesses. If you can pay a portion of your debts, but not all of them, or you can’t pay in the manner your creditors demand or as fast as they want, then Chapter 13 might be best for you.
With Chapter 13, you have a monthly plan of repayment over 3-5 years, which is customized by your attorney. This filing can help you stop foreclosures and repossessions, as well as different types of garnishments. Your plan payments are calculated to pay for things such as missed house payments, paying off your car, and paying the I.R.S.
If you can make payments, Chapter 13 can help you pay what you can afford and also protect as much property as possible.
Chapter 11 Bankruptcy
This type of bankruptcy is targeted to larger businesses, but individuals may also use this reorganization plan. It is similar to Chapter 13, but with more requirements. In addition, it is the most complex bankruptcy filing, and one that most troubled businesses file. Here, the debtor continues to function, maintains ownership of all assets, and tries to work out a ‘reorganization’ plan to pay off creditors.
There are many more specifics in dealing with each type of bankruptcy. If you think that you may need any advice or more in-depth information on bankruptcy, please don’t hesitate to call me and set up an appointment as I can go into much more detail for you!