In today’s economic climate, things are tough for many Americans. Because of this, bankruptcy is on the rise, mainly due to inflation and rising costs. If you are considering filing for bankruptcy as an individual or business, there are several types of bankruptcy to consider, also known as chapters. To understand the process of filing to discharge some or even all of your debt, you first have to know the difference between each of them.
How To File For Bankruptcy
Bankruptcy is a legal process in which you seek to be discharged from any outstanding debt. The first step in the process is to reach out to a bankruptcy attorney to help you figure out your options. Part of the initial discussion will be to review the different bankruptcy chapters and determine which is best for you. After that, the legal filing process begins, which often takes at least several months, if not longer, depending on the circumstances.
Should You File?
If you struggle with overwhelming debt and you’ve tried other options, bankruptcy may be a good fit. Sometimes, no saving and budgeting can help you get out of a large debt. It can often be due to circumstances out of your control. If this is you, then filing for bankruptcy might be helpful. Here is some information on some types of bankruptcy.
Types Of Bankruptcy: Chapters
Bankruptcy chapters are different kinds of processes when it comes to liquidating debt. Some are for businesses, whereas others are focused on the individual. Knowing the difference between these chapters can equip you with information about which is right for you.
Of all the types of bankruptcy, chapter 7 is the most common in the United States. This involves the elimination of debt through the liquidation of assets. Chapter 7 allows you to have a fresh start without debt. There may be exemptions to what can be liquidated, like cars and homes, but generally, all resources are sold off to pay your creditors. You need to take a “means test” to qualify for this chapter, and not everyone does.
Chapter 13 is a type of bankruptcy that allows individuals to develop a repayment plan for outstanding debt. Usually, this ends up in installment payments over several years. In contrast to chapter 7, this kind allows you to protect your assets, like a home, from foreclosure or repossession. Chapter 13 bankruptcies are also looked on more favorably by lenders, which can be helpful in the future.
Unlike chapter 13, this type of bankruptcy is open to individuals and businesses looking to reorganize and settle with creditors. Since it is a more complex and lengthy process, it is mainly businesses and corporations that seek this option. Filing for chapter 11 bankruptcy allows many businesses to keep their doors open as they restructure their debt.
Which One Should You Choose?
The choice to legally discharge your debts is personal, and whatever chapter you decide on is up to your unique needs and preferences. However, it can make all the difference and provide a path to a financially stable future.
Find out which type of bankruptcy is right for you and get started filing by calling the Law Offices of David Brunelle at (413) 539-5959.