What Type of Bankruptcy Chapter Should I File?
The decision to file for bankruptcy and what chapter you should file will depend on your specific financial situation. Chapter 7 is best for people who have inadequate earnings to pay some of their debts and want to retain non-exempt property. But if they have property or some income and can repay some of their debts, Chapter 13 or Chapter 11 may be more appropriate for them, depending on whether they are an individual, corporation, or partnership.
If you have yet to talk to Brian McMahon, our West Palm Beach bankruptcy attorney, here’s what you should know about the different types of bankruptcy chapters available to you.
Understanding Chapter 7 Bankruptcy
Chapter 7 bankruptcy entails liquidating or selling off qualified assets to repay some of your creditors. Certain assets, including Social Security benefits, equity in a vehicle or house, retirement funds, etc., will be protected under bankruptcy laws. The bankruptcy trustee appointed to your case will make an inventory of all assets for liquidation, liquidate them, and use the proceeds to repay creditors.
If all goes as planned, you won’t have any debts after liquidating your assets, even if they do not fully cover all your debts. But it’s vital to note that you cannot discharge some exempt debts, such as taxes and student loans.
Understanding Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, you will keep all your assets. However, you must create a repayment plan that will require you to pay your “disposable income” to creditors for a period of three or five years. If the bankruptcy court approves your repayment plan, your bankruptcy trustee will distribute your repayments to your creditors.
Take note, though, that your debts will not be discharged immediately. You must complete your approved repayment plan before receiving a discharge. However, you will be protected from garnishments, lawsuits, and other collection actions from creditors. You may also discharge a wider range of debts when you file for Chapter 13 instead of Chapter 7.
Understanding Chapter 11 Bankruptcy
Also known as reorganization bankruptcy, Chapter 11 bankruptcy is commonly filed by partnerships, corporations, and other businesses for restructuring and reorganizing debts. The main advantage of this bankruptcy type is that debtors can repay their creditors without needing to close their businesses. However, depending on their debt and income levels, individuals can also opt for Chapter 11 if they are not eligible for Chapter 13 or Chapter 7.
Speak to a Seasoned West Palm Beach Bankruptcy Attorney Now
One of the biggest decisions you’ll make in your life is filing for bankruptcy because it can significantly impact your creditworthiness and financial health for a long time. While some people may not have any choice but to file for bankruptcy, before making any rash decisions, it’s best to discuss your situation with a West Palm Beach bankruptcy attorney to learn more about your case.