If you are dealing with crushing debt, you may be able to find much-needed relief by filing bankruptcy. However, there is not just one type of bankruptcy, there are actually four common types of bankruptcy: Chapter 7, Chapter 13, Chapter 11, and Chapter 12.
If you are considering bankruptcy, you’ll want to learn more about the different chapters so you can determine which one is right for you. If you’re an individual debtor, not a business owner or farmer, you’ll probably decide between a Chapter 7 and a Chapter 13, but still read on to learn more.
Types of Bankruptcy
Since bankruptcy is handled by federal law, it is the same in all states; however, not all states have the same exemptions. “Bankruptcy exemptions” refer to the assets that a debtor gets to keep when he or she files for bankruptcy. That said, these are the four most common types of bankruptcy:
1. Chapter 7: This chapter is reserved for low-income debtors and allows them to wipe out most types of unsecured debts, such as medical debt, credit card debt, taxes of a certain age, and utility bills. It is also called the “liquidation bankruptcy” because certain assets, such as vacation homes, can be sold to pay off creditors. However, most Chapter 7s are no-asset bankruptcies, so the debtor doesn’t have to sell anything.
2. Chapter 13: This is often called the “wage earners” bankruptcy because people with regular jobs and good sources of income may not qualify for a Chapter 7 because their income is too high. With a Chapter 13, the debtor pays off all or a portion of their debts over a period of 3 to 5 years.
3. Chapter 11: This is a reorganization bankruptcy that is typically filed by businesses, but is also available to individuals. With Chapter 11, debtors usually keeps their assets and continue to keep the business’ doors open as their debts are reorganized so creditors can be paid off.
4. Chapter 12: This chapter is for family farmers and it lets the debtor keep their property as they work out a payment plan with creditors.
Contact Nguyen Law Group at (909) 328-6280 to schedule a free case evaluation with a Rancho Cucamonga bankruptcy attorney.
