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  • Writer's pictureDebbie Hayes

Which Type of Bankruptcy is Right for You?



While the best way to determine whether you qualify under Chapter 7, 11 or 13 and decide which option is better for you is to talk to a Bankruptcy Lawyer, here is some basic information about these types of bankruptcy:


A Chapter 7 bankruptcy may be referred to as “liquidation” and entails a debtor surrendering nonexempt assets to the bankruptcy trustee in order to be sold and the proceeds used to pay creditors. Chapter 7 bankruptcy does not entail payment under a plan, rather, a debtor may keep all non exempt assets upon a successful Chapter 7 bankruptcy case. The determination of which assets are exempt and a full analysis of your financial circumstances is necessary in order to determine whether Chapter 7 bankruptcy is proper for you.

Chapter 11 bankruptcy is most often beneficial for business entities seeking to reorganize their business affairs, obtain a breathing spell from certain business or debt pressures while a business plan/strategy is developed or to stop a foreclosure, garnishment or other legal action which could severely harm the business. Chapter 11 may also be utilized by individuals, however, because of the complexities involved in a Chapter 11 bankruptcy as well as the expense it is only appropriate for individuals in certain limited cases.

Chapter 13 is often an option for individuals with higher incomes and who have real property and other assets they need to protect. An individual who has a regular income and can pay basic living expenses but is facing overwhelming debt or foreclosure may qualify for a Chapter 13 bankruptcy.

A Chapter 13 bankruptcy case may be referred to as a “reorganization” or “wage earners plan.” In these cases, the debtor works out a payment plan to pay a portion of eligible debts over a period of three to five years. The amount paid is based on the available disposable income and value of non exempt assets. The outcome is a discharge of all eligible debt at the successful conclusion of the case.

If you would like to know more about the types of bankruptcy and their specific benefits, contact Tom Abrams for an initial consultation without charge.

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