Bankruptcy can knock you flat while you’re trying to move forward. For example, you take out a student loan or other credit that you can’t pay, and suddenly you are forced to declare bankruptcy. Well, for starters, what is bankruptcy? Bankruptcy is a state of insolvency in which an individual or organization cannot repay their debts.
The term “bankruptcy” is also used to refer to the legal status of an insolvent entity. This article explores the main types of bankruptcies, starting from personal (Chapter 7) to corporate bankruptcy (Chapter 11) and many variations in between.
Depending on the specific type of assets a person has and their amount of income, there are numerous forms of bankruptcy that may be attainable. Your bankruptcy attorney in Rockville can provide the best legal advice if in case you are considering bankruptcy.
According to the United States Bankruptcy Code, there are six distinct categories of bankruptcy. Each of them is called after the chapter in which it is discussed. Thus, we have:
These chapters apply to a variety of situations and entities. The most often used bankruptcy chapters are Chapter 7 and Chapter 13 for individuals and Chapter 7 or Chapter 11 for businesses.
We’re going to highlight the most common type of bankruptcy in this post. Chapters 7, 11 and 13.
Chapter 7 bankruptcy is a very common type of bankruptcy. It is available to individuals who are unable to make regular monthly debt payments. Businesses that wish to close their doors may also file for Chapter 7. Chapter 7 provides debtors with relief regardless of the amount of debt owed or the debtor’s financial situation. The bankruptcy court assigns a Chapter 7 Trustee to liquidate the debtor’s assets and distribute the proceeds to creditors.
To fully benefit from bankruptcy laws and obtain a fresh start, it is critical that you refrain from incurring additional debt.
Numerous indicators show that you should file for Chapter 7 bankruptcy. The following are five main reasons why filing for Chapter 7 may be the best course of action:
Learn More: Does filing Chapter 7 mean you will lose everything you own?
A chapter 13 bankruptcy is sometimes termed a wage earner’s plan. It helps individuals with regular income to design a plan to repay all or a portion of their obligations. Underneath this Chapter, debtors establish a repayment plan to settle dues to creditors between three to five years.
If the debtor’s current monthly income falls below the state’s median, the plan will be for three years unless the court permits a longer time “for the cause.” (1) If the debtor’s current monthly income is larger than the appropriate state median, the plan normally must be for five years.
Chapter 11 bankruptcy utilizes reorganization to assist businesses that are heavily in debt. Under the United States Bankruptcy Code, businesses who apply for Chapter 11 bankruptcy protection engage with creditors to reorganize their debts and enterprises.
The company submits a proposed post-bankruptcy plan, which may include the following:
Chapter 11 bankruptcy reorganization offers some significant advantages. It:
On the other side, Chapter 11 bankruptcy is more time consuming and expensive than other types of bankruptcy.
Bankruptcy filling is a judicial process that either lowers, revises or removes your obligations. Whether you obtain that opportunity is up to the bankruptcy court. You have the alternative of filing for bankruptcy on your own, or you can contact a bankruptcy lawyer, which most experts see as the wisest option to take.
Bankruptcy costs include legal fees and filing fees. If you file on your own, you will still be responsible for filing fees.
Before you file, you must equip yourself with what occurs when you file for bankruptcy. It’s not just a question of telling a court, “I’m broke!” and placing yourself at the mercy of the court. There is a procedure — a sometimes complex, often convoluted process – that people and corporations must follow:
The counsellor must be from an approved source listed on the U.S. Courts webpage. Most credit counselling firms offer this service online or over the phone, and you obtain a certificate of completion once it’s done that must be part of the documentation you file. If you omit this step, your filing will be denied.
Understanding federal and state bankruptcy rules, and knowing which ones apply to your case, is vital. Judges are not authorized to provide advice, and neither are court workers. There are several forms to complete and some crucial variations between Chapter 7 and Chapter 13 that you should be aware of while making judgments.
If you don’t know or follow the correct processes and rules in court, it might affect the outcome of your case. Whatever work you put in can lead to dismissal if there is even a slight mistake in the documentation. Without legal guidance, you’re also risking a danger that the bankruptcy trustee can take and sell your property.
When you declare bankruptcy, you aim to make a fresh start, free from the worries of being unable to pay your bills. But what is the best type of bankruptcy for you? Regardless of which type of bankruptcy you choose, a competent bankruptcy attorney from Kurland Law Group offers comprehensive, hands-on legal counsel to anyone who is planning to file bankruptcies. To set a schedule for a free consultation, call us today at (301) 804-0625.