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What Type of Bankruptcy Is Right For Me?

Posted on Thursday, November 14th, 2013    

If you are considering filing bankruptcy, it is important that you understand the different types or “Chapters” available and how each will help you resolve your financial difficulties.  Each type of bankruptcy has different advantages and disadvantages for debtors, so it is important to weigh your options carefully.  A bankruptcy attorney will help you do this by guiding you through the process of evaluating your debts and assets and choosing the right type of bankruptcy for your needs.

All bankruptcies provide protection from creditors, lawsuits, harassment and other problems stemming from unpaid debts.  However, the different bankruptcies are designed to fit different needs and not all debtors may qualify for all types of bankruptcies.

Chapter 7 Bankruptcy

A Chapter 7 bankruptcy is also known as a “liquidation” bankruptcy because most or all of the debtor’s assets are sold to pay creditors.  This type of bankruptcy has the advantage of being fast and relatively simple, and also gives the debtor a completely fresh financial start.  The disadvantage of this bankruptcy is that if the debtor has any real property or assets such as a vehicle they may be taken to pay off creditors.

A Chapter 7 bankruptcy is usually most appropriate when a debtor has mostly unsecured debt and does not have much equity in real property or other assets.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy is also known as a “wage-earner plan.”  This is because Chapter 13 bankruptcies require the debtor to make regular monthly payments to a bankruptcy trustee; in order to do this, the debtor must have some regular form of income.

As part of a Chapter 13 plan, the debtor agrees to pay a certain amount each month until creditors are satisfied.  In return, creditors agree to settle, usually for less than they are owed, if they are paid in a timely manner.  This is a good way for creditors to recover their money and for debtors to pay off their debts.

The disadvantages to Chapter 13 plans are that they take a long time to complete and that not everyone qualifies for this type of bankruptcy.  However, they are a good choice for debtors who have assets they want to keep.

Other Types of Bankruptcy

Businesses may file another type of bankruptcy known as a Chapter 11.  This type of bankruptcy is far more complicated than a Chapter 7 or 13 consumer bankruptcy.  There are also special types of bankruptcy filings for municipalities and for farmers.

Amerio Law Firm is ready to help debtors of all types file the correct type of bankruptcy, discharge debts and receive a fresh start on their finances.

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