Learning About The Different Chapters Of Bankruptcy
If you have significant debt and are unable to repay that debt, filing for bankruptcy is your best option. With that said, there is more than one type of bankruptcy in the United States. According to Title 11 of the Federal Bankruptcy Code, there are four different types of bankruptcy filings. The appropriate filing will vary based on the circumstances of your financial situation. If you’re considering filing for bankruptcy, it’s best to learn more about each type of filing.
Chapter 7 Bankruptcy: Liquidation
This is the most common bankruptcy filing. Someone that files for chapter 7 bankruptcy is liquidating all of their assets and starting fresh. After the filing begins, an administrator will be appointed to handle the sale of the debtor’s assets. This does not mean that everything a debtor owns will be sold. Under both federal and state laws, someone filing for bankruptcy can retain some of their assets, such as their primary residence and personal items, like clothes.
After the administrator has finished liquidating a debtor’s assets, a portion of the money raised will be distributed to the creditors that the debtor owes money to. Other debts may be discharged. After someone has filed for Chapter 7 bankruptcy, they will not be permitted to file again for 7 years.
Chapter 11 Bankruptcy: Reorganization
Chapter 11 bankruptcy was initially created to allow corporations to discharge their debt. However, due to changes in laws, individuals also have the option of filing for Chapter 11 bankruptcy. Under Chapter 11 filings, a debtor does not have to sell their assets. They are only required to pay a percentage of the money that they owe to creditors. A repayment plan will be developed with the administrator handling the bankruptcy. In the majority of cases, debts will be repaid over the next three to five years.
In order to qualify for Chapter 11 bankruptcy, someone must be able to prove that they have a secured and steady income. Many individuals are ineligible to file for Chapter 11 bankruptcy because their income does not meet the necessary requirements. Anyone considering filing for Chapter 11 bankruptcy should speak to an attorney to discuss their options.
Chapter 12 Bankruptcy: Adjustment of Debts of a Family Farmer
This bankruptcy filing is designed for farmers. It’s similar to Chapter 11 bankruptcy but is only an option for debtors who own a smaller farm. Most debtors will not be eligible for this form of bankruptcy.
Chapter 13 Bankruptcy: Adjustment of Debts of an Individual
Chapter 13 bankruptcy is very similar to Chapter 11 bankruptcy. The key difference is that an individual must have under $269,250 of unsecured debt and under $807,750 of secured debt. Chapter 11 bankruptcy does not have these limitations.
Once you’re familiar with the different chapters of bankruptcy, you can determine which type of bankruptcy you should be filing for. Although the majority of debtors will be filing for Chapter 7 bankruptcy, having information about the differences between bankruptcy chapters will allow you to make a more informed decision.
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About the Author
Anthony W. Chauncey is highly qualified and dedicated in the areas of Bankruptcy, Foreclosure Defense, Criminal Defense, Traffic Citations, Family Law, and Personal Injury who can help you in your time of need.
