Filing bankruptcy may feel like the last resort for many individuals or businesses. To file bankruptcy, the individual, or business, is usually under a large amount of debt that they cannot consolidate. Some types of bankruptcies will clear most of the debt, whereas others will require the individuals to pay back some of the debt that they owe.
There are several types of chapters of bankruptcies that can be filed. In order to know which option is going to work best for individuals or businesses, it is important to know what each chapter is for and the terms.
- Chapter 7— Chapter 7 Bankruptcy is for individuals, partnerships, and corporations. Any debt that cannot be repaid through liquidations will be discharged. The individuals do not have to pay back for any of the debt that was discharged. Liquidations are non-exempt assets that have to be sold in order to help repay back the debt that is owed. Businesses try to avoid Chapter 7 Bankruptcy so that they can still operate their business.
- Chapter 11 – A Chapter 11 Bankruptcy is a popular choice that businesses will use. This way the business will still be able to operate their business and will not lose any assets that they have. The business will have to organize a plan in order to pay off all the creditors they owe money to. Chapter 11 helps businesses get on track to stay in business and pay off the money they owe.
- Chapter 12 — Chapter 12 Bankruptcy is for farm owners only. The farm owners will still own all of their assets and are not required to sell them. A repayment plan will need to be organized in order to pay off all the creditors they owe. This will ensure they can still operate their farm and use the assets to help them operate.
- Chapter 13 — Chapter 13 is for individuals and works the same way chapter 11 does. The repayment plan that the individual has to make will need to be organized over a three to five year plan. This will ensure that their creditors will be paid off in the three to five years they set. The individuals will not lose any of their assets and are not required to sell their assets when they file a Chapter 13 Bankruptcy. Now, some of the debt may be able to be discharged. This will be determined on the amount of debt and whom it is owed to. The debt that is involved in a Chapter 13 Bankruptcy may be limited depending on the individuals circumstances. A bankruptcy attorney will be able to advise if this is going to be the best option for the individual that needs to file bankruptcy.
Once an individual or business has looked over their options, they will be able to decide which type of bankruptcy chapter is going to work best for them. The next step is to have a free consultation with a bankruptcy attorney. This will allow them to know the next steps they will need to take in order to file for bankruptcy, and they will learn the costs that will be associated with it. After bankruptcy, the individuals or businesses will be able to try to rebuild their credit for a fresh start.