Definitions of Chapter 7, 11, and 13 Bankruptcy
Different chapters of bankruptcy are available to service the debt relief needs of people with various financial difficulties. Chapter 7 bankruptcy tends to be the least complicated and usually takes the least amount of time to administer. Chapter 13 bankruptcy was created for people who can afford to repay some of their debts over a period of time. Businesses and individuals with high value assets utilize Chapter 11 bankruptcy to get back on track.
Other People Are Reading
-
Chapter 7
-
People file for bankruptcy when they are seeking protection from their creditors. Chapter 7 bankruptcy is known as liquidation because if the debtor has any assets that are not exempt under the Bankruptcy Code, those assets can be used to pay the outstanding debts. Businesses file for Chapter 7 bankruptcy when the business is no longer operational and the remaining assets must be liquidated to pay the creditors. Individual debtors must pass a means test which determines if a person is eligible to file for Chapter 7 based on his income and expenses. Chapter 7 cases are processed fairly quickly, and the debtor's case may be discharged within a few months.
Chapter 13
-
Chapter 13 bankruptcy gives debtors the opportunity to become current with their delinquent accounts while still keeping their property. Instead of debtors having to pay their delinquent mortgages and car loans within a few days or months, the debtors can pay down the delinquent amounts over a span of years. While the debtors keep making timely payments toward their loans in the bankruptcy, they don't have to worry about their property getting repossessed. When the bankruptcy case is completed, the debtor does not have to make any more payments for debts that are discharged.
-
Chapter 11
-
Businesses that need time to reorganize their debts and assets file for Chapter 11 bankruptcy. Usually, Chapter 11 debtors are corporations, but individuals with unsecured debts greater than $360,475 and secured debts that exceed $1,081,400 file for Chapter 11 bankruptcy as well. The initiation of the Chapter 11 case stops the collection demands of lenders, vendors and other creditors. The business remains in operation while the debtor and debtor's attorneys create a plan to get rid of some debts, while extending the deadline to pay other debts. A Chapter 11 plan of reorganization must be approved by the creditors involved in the case.
Bankruptcy Information Sources
-
Speaking with a bankruptcy attorney is one way to find out more about bankruptcy and the various chapters. Set up an appointment for a consultation. Those consultations are an opportunity to ask many questions and figure out whether pursuing bankruptcy will be beneficial. Bankruptcy attorneys also know how to utilize the Bankruptcy Code in a manner that is most advantageous for their clients. The district bankruptcy court websites also provide valuable information regarding the bankruptcy process, the local court rules and the Federal Rules of Bankruptcy Procedure for each chapter of bankruptcy.
-
References
- Photo Credit Debt concept - cutting a credit card image by Sophia Winters from Fotolia.com
