You can file several various types of bankruptcy. The chapters of bankruptcy correspond with the chapters in the U.S. Bankruptcy Code. Every chapter in the Code contains a specific grouping of rules and laws. Although there are several different chapters of bankruptcy, Chapter 13 and Chapter 7 are two of the most common chapters that you’ll recognize and likely file.
What Is Chapter 7 Bankruptcy?
Individuals and married couples commonly file Chapter 7, but businesses can also file as well. Unfortunately, Chapter 7 is not only one of the most common types of bankruptcy that people file, it is also very severe. Under this Chapter, the court appoints a Trustee and works to collect all of the assets that are owned by the individual.
The trustee then proceeds to sell the assets and use the money he collects from the sale to pay the creditors that the individual owes. Any asset that is exempt due to state or federal law is not required to be included in the sale. Once the process is complete, filings cannot repeat for a period of eight years.
What Is Chapter 13 Bankruptcy?
For individuals who have a reliable income source, Chapter 13 bankruptcy is an option . Small businesses can also file Chapter 13. Under the rules that relate to this Chapter, individuals must agree to a ‘financial reorganization’ plan. This means that the individual agrees to settle all outstanding debts within five years.
Chapter 13 bankruptcy allows the debtor to keep possession of all assets during this time. However, a court has the power to either approve or disapprove the reorganization plan. You can file Chapter 13 bankruptcy at any time.
Other Types of Bankruptcy
Other bankruptcy types you can file are Chapter 11 and Chapter 12. Businesses file Chapter 11, but some individuals also file Chapter 11. A Chapter 11 bankruptcy is very similar to Chapter 13, but more requirements connect to the former. If a debtor wants to pay off outstanding debts, a Chapter 11 filing or Chapter 13 filing are the preferred choices. This is especially true if the debtor will want to rebuild credit.
Chapter 12 is a voluntary bankruptcy option. Farmers typically choose Chapter 12 so they can pay off their debts within a certain period of time. It is one of the types of bankruptcy that works for farmers who have stable incomes. Farmers who have seasonal incomes benefit from it as well.
Although the different types of bankruptcy may sound like a quick solution to your financial troubles, the decision to file should be taken seriously. To help you decide if filing is the best option for you, find a qualified bankruptcy attorney in your area.