3 Primary Types of Bankruptcies

The bankruptcy process can be a daunting one, with various types to consider depending on your financial situation. In the United States, there are three primary types of bankruptcies: Chapter 7, Chapter 11, and Chapter 13. Each has its own set of advantages and disadvantages, and the right one for you will depend on your individual circumstances. Here, we will delve into the details of each to help you make an informed decision.

Chapter 7 Bankruptcy: Liquidation

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is designed for individuals who have little to no disposable income. Those who qualify for Chapter 7 must sell their non-exempt assets to repay as much of their debt as possible. The remaining unpaid debt is then discharged, giving the individual a fresh start. It’s important to note that not all debts can be discharged, including most student loans, child support, alimony, and certain tax debts.

Chapter 11 Bankruptcy: Reorganization

Chapter 11 bankruptcy is primarily used by businesses that need time to restructure their debts and obligations. This type of bankruptcy allows businesses to continue operating while they reorganize their debts. A plan is proposed to creditors for repaying a portion of the debts while discharging others. While Chapter 11 can provide a lifeline for struggling businesses, it’s worth noting that the process is complex, time-consuming, and expensive.

Chapter 13 Bankruptcy: Repayment Plan

Chapter 13 bankruptcy, often called “wage earner’s bankruptcy,” allows individuals with regular income to develop a plan to repay all or part of their debts over three to five years. The amount to be repaid is based on various factors, including the debtor’s income, expenses, and types of debt. This type of bankruptcy can be beneficial for those who want to keep their home, car, or other valuable assets, which might otherwise be lost in a Chapter 7 bankruptcy. During an initial consultation a bankruptcy lawyer in Fresno, California can explain how these three types of bankruptcy compare to each other.

Choosing the right bankruptcy type is not a decision to be taken lightly. It’s crucial to consider all factors, including your income, assets, debts, and long-term financial goals. Consulting with a knowledgeable and experienced attorney can provide invaluable guidance during this process. If you’re considering bankruptcy, reach out to Liviakis Law Firm at 916 459 2364 for assistance.