Three Types Of Bankruptcy: Which Is Right For You?
Posted on: 5 June 2023
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Are you struggling with debt? Do you feel like there's no way to get out of it? While bankruptcy is never an ideal outcome, sometimes it's the best solution to deal with debt problems. Bankruptcy allows you to resolve your debt and get a fresh start. It could be a faster way to get on your feet than simply paying down the debt. There are several types of bankruptcies for individuals. Chapter 7 and Chapter 13 are commonly used. Chapter 12 is a unique form that certain individuals can use. Below is an overview of each type. A bankruptcy attorney can help you determine which option is right for you.
Chapter 7 Bankruptcy
Chapter 7 is the most commonly used form of bankruptcy. It's popular because it quickly eliminates debt and gives you an opportunity to start fresh. In a Chapter 7 bankruptcy, you sell most of your assets, and the proceeds are used to pay creditors. Nearly all of your debt is eliminated at the end of the process. The thing to consider with a Chapter 7 is that you will likely lose most of your assets. Your home, car, savings, and even collectibles could be sold. You may also be ineligible for new loans for years. However, your debt will be eliminated, and you will have the opportunity to start fresh nearly immediately after the bankruptcy is complete.
Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy, your debts aren't eliminated but are reorganized. Your attorney and the bankruptcy court work with your creditors to establish an affordable payment plan. You get to keep your assets like your house and car. However, you must stick to the payment plan. If you miss a payment, your plan could be dismissed. The court and your creditors can also review your spending and ensure you stay within a court-approved budget. Chapter 13 Bankruptcies usually last several years. However, you can usually start rebuilding your credit as soon as you complete the process.
Chapter 12 Bankruptcy
A Chapter 12 bankruptcy is a special type for those who own farms or run agricultural businesses. Revenue in those industries can be volatile, and it's not hard for farmers to find themselves in challenging debt situations. A Chapter 12 bankruptcy is similar to a Chapter 13 in that you can keep most of your assets, continue running your farm, and work out a payment plan with creditors. The debt limits for Chapter 12 are usually higher than those for Chapter 13. If you own a farm or other agricultural business on your property, you may qualify for Chapter 12 and benefit from more flexible payment terms.
Not sure which option is best for you? Contact a bankruptcy lawyer in your area today. They can help you determine if bankruptcy is right for you and which path is best.
Reach out to a bankruptcy attorney in your area to learn more.