Bankruptcy Basics

Bankruptcy is a legal process that can help individuals and businesses who are struggling to pay off their debts. It allows debtors to get a fresh financial start by either restructuring debt or wiping out some of it altogether. There are different types of bankruptcy filings, each with its own set of criteria, advantages, and disadvantages. Before considering bankruptcy, it’s important to consult with a bankruptcy attorney for guidance on which type of bankruptcy filing is appropriate for your specific situation.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also known as “liquidation bankruptcy.” It’s the most common type of bankruptcy filing and is mainly designed for individuals and small businesses with limited income and assets. In a Chapter 7 bankruptcy filing, a debtor can eliminate most or all of their unsecured debts, such as credit card debts and medical bills. To qualify for chapter 7 bankruptcy, a debtor must take a “means test,” which compares their income to the median income in their state. If the debtor’s income is lower, they may qualify for Chapter 7 filing. Looking to dive deeper into the subject matter? Explore this external source we’ve arranged for you, containing additional and relevant information to expand your understanding of the topic. how to settle with a debt collector, keep learning!

Advantages of Chapter 7 Bankruptcy:

Debtors can receive a complete discharge of their unsecured debts

The filing process is relatively quick (3 to 6 months)

Debtors don’t have to make payments to a bankruptcy trustee

Disadvantages of Chapter 7 Bankruptcy:

Debtors may lose their personal property that isn’t exempt under state or federal law

Debtors may have trouble getting credit in the future

Not all debts can be discharged (such as student loans, alimony, child support, and some taxes)

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is also known as “reorganization bankruptcy.” It’s designed for individuals with a regular income who are struggling to pay off their debts. In a Chapter 13 bankruptcy filing, a debtor can restructure their debt payments into a manageable plan that lasts from 3 to 5 years. This means the debtor can keep their assets, such as a home or car, and repay their debts over time. To qualify for Chapter 13, a debtor must have unsecured debts of less than $394,725 and secured debts of less than $1,184,200.

Advantages of Chapter 13 Bankruptcy:

Debtors can keep their assets and catch up on past-due payments, such as mortgage arrears

Debtors can avoid foreclosure or repossession of their property by following the payment plan

Debtors have up to 5 years to pay off their debts, which can make monthly payments more manageable

Disadvantages of Chapter 13 Bankruptcy:

Chapter 13 bankruptcy is more complex and expensive than Chapter 7 bankruptcy

Debtors have to follow a strict payment plan, which can limit their spending habits for up to 5 years

Not all debts can be discharged, which means the debtor is still responsible for paying them off

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is commonly used by businesses that are going through financial turmoil. However, individuals with significant debts may also file for Chapter 11 bankruptcy. In this type of filing, the debtor submits a reorganization plan to the court, which outlines how they intend to restructure their debt payments and operations to become financially stable. The bankruptcy court must approve the plan for it to become effective. Chapter 11 bankruptcy is more complicated and expensive than the other types of bankruptcy filings and is generally reserved for large-scale businesses with substantial assets and liabilities.

Conclusion

Bankruptcy can be a useful tool for individuals and businesses struggling with debt. Knowing the different types of bankruptcy filings can help you make an informed decision about which one is right for your situation. It’s important to consult with a bankruptcy attorney for guidance on the best course of action. With the right help, you can emerge from your financial difficulties with a fresh start and the opportunity to regain financial stability. Want to learn more about the subject? settle debt https://www.solosuit.com/solosettle, you’ll uncover supplementary facts and supporting data that will additionally enhance your educational journey.

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