What different types of Bankruptcy should you consider?
There are several types of bankruptcy, but the most commonly used types are known as Chapter 7 and Chapter 13.
- Chapter 7. A Chapter 7 bankruptcy is also known as “straight” bankruptcy. Chapter 7 usually allows most people to keep their property and not give it up to creditors. However, careful planning is the key to making sure you keep your home, your IRA, your 401-K, your jewelry, your car, and other property. More on Chapter 7 Bankruptcy
- Chapter 13. A Chapter 13 Bankruptcy is sometimes called a “debt adjustment” or “consolidation.” In Chapter 13, you file a plan to pay debts (or part of debts) to the bankruptcy court from your future income. Chapter 13 can be very effective in lowering or eliminating interest rates. It also can be useful in forcing the creditor to accept a more convenient payment plan. More on Chapter 13 Bankruptcy
- Chapter 11. A Chapter 11 Bankruptcy is generally used for large corporate reorganizations or for individual reorganizations where the debtor is over the Chapter 13 limit for amount of debts.
- Chapter 12. A Chapter 12 Bankruptcy is for a family farmer reorganization.
Why would someone choose to file Chapter 13 over Chapter 7?
- The debtor owns non-exempt property that would otherwise be lost in Chapter 7.
- The debtor is behind on car or house payments and needs a chance to catch up on these payments over a long period of time.
- The debtor has a lot of tax debts.
- The debtor is making so much money that it would be unfair to file a Chapter 7 Bankruptcy.
- The debtor has received a prior Chapter 7 Bankruptcy Discharge in the last 8 years or a Chapter 13 Discharge in the last 6 years.
- The debtor has debts that are not dischargeable in Chapter 7 but are dischargeable in Chapter 13.
- The debtor is seeking to protect a “co-signer” from legal action.