If you’ve stumbled upon this article then you’re probably looking for some basic information regarding the different types of bankruptcy that exist. Perhaps you want to know which types of bankruptcies most closely coincide with your individual situation or maybe you just want to know if one type of bankruptcy is more advantageous than another. While these are all good questions to consider, it’s important to note that each type of bankruptcy was set up to address a specific type of case. In other words, there are key differences between each of the 4 major chapters of bankruptcy as defined by the United States Bankruptcy Court.
Although there are a few different types of bankruptcy to choose from, the type you choose will depend on your own unique circumstances. Although you can certainly make the determination for yourself, it’s always a good idea to consult directly with a qualified and reputable bankruptcy attorney or other financial professional that specializes in debt management. This person can help you put things into perspective while helping you arrive at the best possible decision. While there are 4 different types of bankruptcy filings to choose from, each of which is named based on their chapter classification in the U.S. Bankruptcy Code, the two most common types for individuals are Chapter 7 and Chapter 13.
Chapter 7 Bankruptcy
When most individuals refer to filing bankruptcy, what they are really referring to is filing under the Chapter 7 code. Often referred to as liquidation bankruptcy or “straight bankruptcy,” Chapter 7 involves the sale of non-exempt assets to pay back the debt that is owed. In other words, a debtor agrees to have their assets sold off to pay for their debts. Any amount of debt above and beyond this payback is discharged, allowing the debtor to essentially “start over.” Because most debtors don’t have much in the way of assets to be liquidated, they receive a fresh start relatively quickly. Click on the following link for a complete Chapter 7 bankruptcy definition.
Chapter 13 Bankruptcy
This is often referred to as “reorganization bankruptcy” since it involved the creation of a repayment plan. The key difference between Chapter 13 and Chapter 7 is that the debtor is not releasing any of their assets for liquidation; rather, the goal is for the debtor to retain such assets under the assumption that they can make regular payments to their creditors. Unlike Chapter 7 which is generally easier to quality for, a debtor must show actual proof that they will be able to make their payments under the repayment scenario. Although companies can’t file under Chapter 13, they can file under Chapter 11, which essentially states the same criteria. Click on the following link if you want to know the answer to how does Chapter 11 work.
For more information on both Chapter 7 and Chapter 13 and for help on how to claim bankruptcy, please feel free to browse around our site. Claiming bankruptcy can be an extremely stressful and time-consuming process, which is why it’s so important to arm yourself with as much information as possible.