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Different Types of Bankruptcies: Explained

Bankruptcy is a financial tool that allows people to start over with a clean slate. It can be used to discharge debts, and it offers relief from the pressure of debt collectors. When most people think about bankruptcy, they imagine a person who has run out of options and is filing for Chapter 7 bankruptcy. This is the most common type of bankruptcy, but it’s not the only one. There are actually several different types of bankruptcies, each with its own benefits and drawbacks. Here’s a look at some of the different types of bankruptcy:

 

Chapter 7 Bankruptcy

As we already mentioned, chapter 7 bankruptcy is the most common type of bankruptcy. It’s available to individuals and businesses, and it allows you to discharge most or all of your debts. With chapter 7 bankruptcy, you need to prove that you have a low income, and the court will sell off some of your property to pay back your creditors. Common types of debts include credit cards, medical bills, repossession loans, and payday loans. However, student loans are exempt from being discharged via chapter 7 bankruptcy. As mentioned by a Youngstown chapter 7 bankruptcy lawyer, when filing for this type of bankruptcy, it’s important that you find a lawyer in your area. However, make sure they are specialized for chapter 7 bankruptcies.

Chapter 13 Bankruptcy

If you don’t qualify for chapter 7 bankruptcy, or if you want to keep some of your property, chapter 13 bankruptcy might be a better option for you. This type of bankruptcy allows you to keep your property, but you need to agree to a repayment plan that will pay back your creditors over the course of three to five years. This type of plan is beneficial for people who aren’t allowed to keep their property in chapter 7 such as small business owners and landlords, or if you can afford it over a few years. It’s also helpful for people who have assets that need to be liquidated but don’t want to sell them off in a fire sale. Your lawyer will help you decide if chapter 13 bankruptcy is the right option for you.

Chapter 11 Bankruptcy

If your business is in debt, chapter 11 bankruptcy might be a better option. This type of bankruptcy allows you to restructure your business and come up with a repayment plan that works for everyone involved. Your creditors will be at the table, and they will have a say in how your business is run. This type of bankruptcy is often used by businesses that are struggling but have the potential to be profitable again. It’s important to note that this type of bankruptcy can be expensive, and it can take a long time to complete. 

 

Other Types Of Bankruptcies

Chapters 7, 13, and 11 are the most common types of bankruptcy, but there are others. For example, chapter 12 bankruptcy is for farmers and fishermen who have more than $1.5 million in debt. This type of bankruptcy allows them to keep their property and come up with repayment plans. There is also a type of bankruptcy specifically made for municipalities and nonprofit organizations. Chapter 9 bankruptcy is usually used by cities and municipalities that need to restructure their debt. This type of bankruptcy isn’t available to individuals or businesses. Finally, chapter 15 bankruptcy is for creditors who want to consolidate cases from several different jurisdictions into one case. Chapter 15 bankruptcy is often used when a creditor in one state wants to collect on a foreign judgment. 

There are several different types of bankruptcy, each with its own benefits and drawbacks. Chapter 7 bankruptcy is the most common type and allows you to discharge most or all of your debt. With chapter 13 bankruptcy, you can keep your property but need to agree to a repayment plan. Chapter 11 bankruptcy is for businesses that want to restructure or come up with a repayment plan. Chapter 12 is for farmers and fishermen, and chapter 9 is for cities and municipalities. Chapter 15 bankruptcy allows creditors to consolidate cases from multiple jurisdictions into one case. Which type of bankruptcy you might benefit from the most depends on your specific situation. If you’re not sure which type of bankruptcy is right for you, talk to a lawyer in your area who specializes in bankruptcies. They will be able to help you find the best option for you. Hopefully, this article has helped you understand the different types of bankruptcy and how they can help you.

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