Making the decision to file for bankruptcy is never easy. However, after finally making the larger decision to enlist the protection of the courts against your creditors, it is important to understand your personal circumstances to decide which type of bankruptcy is best. While many financial challenges can create tremendous amounts of stress, making it extremely difficult to get out of debt, it is important to discuss all the available options concerning your financial situation, before filing.
If you know that bankruptcy is truly the only way to relieve the pressure and financial stress generated in your life, there are four specific types of bankruptcy that can be filed. They include:
When the general public thinks about bankruptcy, they often are referring to the type of scenario that causes a total liquidation of all of the debtor’s assets. This is recognized as a bankruptcy under Chapter 7. Part of the process will include a bankruptcy trustee that will work as a third party to sell off any non-exempt asset that is currently being held by the individual filing for bankruptcy (debtor). The selloff is the action to repay the debt as much as possible.
Eligibility for filing Chapter 7 includes any individual, partnership or corporation. Any portion of the remaining debt that has not been repaid through the process of asset liquidation will be automatically discharged in bankruptcy court, and “forgiven” in the eyes of the law. Many businesses tend to avoid Chapter 7 because of the totality of the process. By filing a bankruptcy under other chapters, the business can still stay in operation, generating income through all the procedures. A bankruptcy under Chapter 7 bankruptcy completely liquidate the debtor’s assets in an effort to pay as much of the debt off as possible.
Attorneys often use Chapter 11 bankruptcy for their most complex cases. Even though individuals can file for Chapter 11, it is usually a troubled business that uses the specific option. With Chapter 11, the business debtor will continue to operate. It will be allowed to use all of its assets while it develops and implements a reorganization plan that is designed to pay off every creditor.
A Chapter 12 bankruptcy is designed specifically for individuals that own a farm. The debtor will still have the ability to own and maintain all of the farm assets during the process where the repayment plan is developed and implemented. It is this effort that strives to repay all creditors.
Often referred to as a “wage earner plan”, it is the Chapter 13 bankruptcy that provides the opportunity to keep valuable properties including automobiles and a home during the procedure. Also known as a re-organizational plan, Chapter 13 bankruptcy allows the individual to make regular, routine monthly payments, which is combined with a small portion of the money owed in arrears. Chapter 13 provides the opportunity for the debtor to take up to five years to pay back all of the past payments, without needing to give up the asset.
There are significant advantages to filing a Chapter 13 bankruptcy, including the ability to feel good about paying back as much debt as possible over a longer amount of time.
Reaching the decision to file bankruptcy depends on each individual’s situation. It is always best to consult with an experienced bankruptcy lawyer as quickly as possible to determine the best way to file. For most individual cases, the choice of which type of bankruptcy can be obvious. However, there are many incidences and specific situations that require help from an attorney to decide which one is best.