Exploring the Types of Bankruptcy
If you're considering filing for bankruptcy, you should form an idea about what that decision will mean for you and your family. Below, you'll find short descriptions for some of the more common types of bankruptcy. Each of these names references a specific chapter of the Bankruptcy Code, which governs bankruptcy procedures all across the country. Read over each one carefully, and as you consider your own financial strategy, think about which plan would work best for you.
Some of the more widely recognized types of bankruptcy declaration include:
Chapter 7 for Consumers
Chapter 7 bankruptcy allows consumers with significant debt to regain control of their finances. While this form of bankruptcy discharges consumers from some of their financial obligations, other debts outlined by the Bankruptcy Code will still require repayment. To ensure that the consumer meets these obligations, a trustee will organize a period of liquidation in which the debtor's nonexempt property is sold to raise the necessary funds.
Chapter 11 for Businesses
Chapter 11 bankruptcy focuses its aid on businesses that face large amounts of debt. By declaring for Chapter 11 bankruptcy, a business agrees to reorganize its financial structure so that it can pay off its liabilities while continuing its business operations.
Chapter 12 for Family Farm or Fishing Operations
Chapter 12 bankruptcy specifically helps owners of family farms or fisheries recover from extreme financial debt. Similar to Chapter 11 bankruptcy, Chapter 12 allows the business to continue operations as it reorganizes and reconciles some or all of its outstanding debts.
Chapter 13 for Consumers with Regular Income
By filing for Chapter 13 bankruptcy, also known as "wage-earner bankruptcy," individual consumers allow for a three- to five-year repayment plan to guide their debt reconciliation. To qualify for this type of bankruptcy, the consumer must maintain a specific amount of income. Furthermore, the consumer's total debt must not exceed the amount indicated in the Bankruptcy Code.
Try to remain positive as you work through this tough financial time, and seek financial counseling before you act. (In most cases, a consultation with a United States Trustee is required before bankruptcy proceedings can begin.) If you still feel certain about filing for bankruptcy, you may want to consider retaining the services of a bankruptcy lawyer to guide you through the proceedings.