Filing for bankruptcy sometimes has negative connotations, but in reality, it can be a viable way for a person to get a financial breakthrough. Depending on the type of bankruptcy filed, different options may be available for the debtor, which can help them get a new start when it comes to their finances. Some different types of bankruptcy filings include:
- Chapter 7– Often called "liquidation" bankruptcy, this allows the debtor to have some or most of their debts cancelled.
- Chapter 11– This is a reorganization bankruptcy available for businesses that wish to restructure their finances.
- Chapter 12– This type of filing mostly involves family farms and fishing businesses.
- Chapter 13– "Reorganization" bankruptcy for individuals. It allows them to follow repayment plans, often at reduced rates.
- Chapter 14– Reorganization bankruptcy for larger corporations and businesses.
There are many different eligibility requirements associated with each of these. One type of plan may be more beneficial in one case when compared with another.
What Are the Most Common Types of Bankruptcy?
For consumers, Chapter 7 and Chapter 13 are the most common types of bankruptcy filings. These usually offer the most benefits for consumers who have encountered legal issues with their debt. This is mainly debt that has to do with purchases, credit cards, mortgages, etc.
Chapter 7 is advantageous for persons seeking to have their debts cancelled. Not all debts are dischargeable however under Chapter 7. Also, the person may have to sell some of their property and have some of the proceeds go to creditors. This all depends on the unique circumstances of each individual situation.
Chapter 13 allows the person to begin paying back creditors for debts under a restructured payment plan. This can involve an adjustment of monthly payments and financial rates.
How Are Bankruptcy Disputes Resolved?
Disputes over bankruptcy claims can arise frequently once the bankruptcy proceedings have begun. Further litigation may be needed to resolve disputes between a creditor and the lender. Disputes between creditors are also common. Many of these legal disputes end up in a civil damages award for the non-liable party.
Should I Hire a Lawyer?
It can be difficult to understand bankruptcy laws, as there are many different types of bankruptcy claims. You may wish to hire a bankruptcy lawyer if you need help with a bankruptcy filing. Your attorney can advise you on the different types of bankruptcy chapters. Your lawyer will be able to help you understand which one is best for your situation, and what the legal effects are for each.