What Type of Bankruptcy Should I File?
Choosing to file for bankruptcy is never an easy decision. And deciding what type of bankruptcy is best for your circumstances can be difficult. While financial difficulties may create a lot of stress and make it difficult to see any way out of your debt, it is important to discuss all the options available to you. Bankruptcy is not always the best option in every circumstance and an experienced bankruptcy attorney should not only be able to tell you what type of bankruptcy is best for your circumstances, but if, indeed, filing for bankruptcy is in your best interest.
If you have decided that bankruptcy is the only way you can relieve your financial stress, there are generally three types of bankruptcy you may be eligible to file: Chapter 7 bankruptcy, Chapter 11 bankruptcy and Chapter 13 bankruptcy.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a type of bankruptcy where your assets are liquidated to pay back your creditors. In some instances, creditors may repossess your home or car to pay back secured debt. In other circumstances, you may be able to keep such property. Chapter 7 bankruptcy is generally filed by individuals with little to no assets as it allows them to have most of their debt discharged without losing any of their assets. Individuals with a lot of assets may want to consider filing for Chapter 13 bankruptcy as this allows you to maintain your assets (in most circumstances). It is important to be aware that not all of your debt will be discharged under a Chapter 7 bankruptcy. An experienced bankruptcy attorney should be able to help you understand all of the nuances of filing for Chapter 7 bankruptcy under your circumstances. For more information, see What’s Chapter 7 Bankruptcy?
Chapter 11 Bankruptcy
Chapter 11 bankruptcy is generally used by businesses as a way to restructure their debt without losing their company. Filing for Chapter 11 bankruptcy allows a business to continue operating throughout bankruptcy proceedings. Upon submission of a petition for Chapter 11 bankruptcy, all creditors’ actions to recover money owed to them must cease. This provides businesses with the opportunity to develop a plan on how they will pay back their creditors. Creditors have the opportunity to contest this plan if they believe they would receive more compensation through liquidation; however, a bankruptcy judge ultimately determines what will be in the best interest of the creditors and approves a repayment plan according to his or her own discretion. Consulting a bankruptcy attorney is very important for businesses considering Chapter 11 bankruptcy. A qualified bankruptcy attorney should be able to help you determine if filing for bankruptcy is the best option for your business. For more information, see What’s Chapter 11 Bankruptcy?
Chapter 13 Bankruptcy
Chapter 13 bankruptcy generally provides an individual with an opportunity to repay debt owed to creditors without losing any assets. While you are responsible for filing a repayment plan with the bankruptcy court, creditors may challenge your plan and make their own demands. Ultimately, a plan to repay your creditors must be approved by a bankruptcy judge. That plan must be in the best interest of the creditors and if your creditors would fare better under a Chapter 7 liquidation of your assets, your petition for a Chapter 13 bankruptcy may be denied. It is always best to discuss your financial problems with a bankruptcy attorney before filing for Chapter 13 bankruptcy. A bankruptcy attorney should be able to help you navigate through all the details of a Chapter 13 bankruptcy and help you determine if it is the right chapter for you to file. For more information, see What’s Chapter 13 Bankruptcy?
Bankruptcy is a very serious solution to a very serious problem (see How Filing Bankruptcy May Affect Your Life). The laws surrounding bankruptcy are complex and demand the attention of a bankruptcy attorney. Filing bankruptcy incorrectly may subject you to perjury charges in the future or may have unnecessary consequences that could have been avoided had you consulted an experienced bankruptcy attorney. A bankruptcy attorney should be familiar with all of the intricacies of bankruptcy law and help you determine what is the best option for your circumstance.