Although nearly every adult has heard of filing for bankruptcy, very few know the aspects that are involved. For instance, most people do not realize that there are four different kinds of bankruptcy filings — Chapter 7, Chapter 11, Chapter 12, and Chapter 13. Although similar, they are small differences between them.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is the most common type of filing and can be used by individuals, married couples, or companies. In this type, a bankruptcy trustee cancels most, if not all, of your debts but may also sell off some of your property to repay creditors. The process takes between four to six months and costs a fee of $299. This category of bankruptcy is limited to those who pass a Chapter 7 means test designed to exclude those with a higher income.
Chapter 13 Bankruptcy
Filing for bankruptcy under Chapter 13 is different from Chapter 7 in that you can keep your assets but must agree to pay back your debts (or an agreed-upon portion of them) over three to five years. You and the bankruptcy trustee will develop a repayment plan that must be approved by the court. This will include full repayment of certain kinds of debts, regular payments on secured debts, and an honest attempt to make payments on unsecured debts using any remaining disposable income. The qualifications for Chapter 13 bankruptcy are fairly simple. You must have an income that is high enough and reliable enough to convince the court that you are capable of paying off your debts in the time provided. There is also a limit to the amount of debt you can have and still be eligible for this type of bankruptcy.
Chapter 12 Bankruptcy
Chapter 11 Bankruptcy
Chapter 11 bankruptcy is also very similar to Chapter 13 bankruptcy, but it removes one of the qualifications. Chapter 11 has no limit on the amount of money owed to creditors. This type of bankruptcy was originally intended for corporations with a large operating budget, but it has now also been extended to individuals.
This brief overview of the types of bankruptcy just scratches the surface of the complexities of bankruptcy law. Making decisions regarding this process can be difficult and overwhelming. Don’t struggle through filing for bankruptcy on your own. Contact the offices of Witkon Law today for a free confidential consultation.