Types Of Bankruptcy

Chapter 7: This is a liquidating bankruptcy, formerly called “straight bankruptcy.” Its principal advantage is that you come out without any future personal obligations of your discharged debts.

Chapter 11: Another type of proceeding in bankruptcy is a Chapter 11 reorganization. It is generally used by a business (however, individuals can also file chapter 11) or by debtors with substantial assets that would be lost in a straight bankruptcy. In a Chapter 11 proceeding the creditors are temporarily stopped from taking any action against the debtor while he tries to work out a plan of reorganization that proposes a method of paying or settling debts. The creditors vote on the plan which must also be approved by the court. This type of proceeding is designed to preserve an ongoing business which would otherwise be lost in a liquidation.

Chapter 12: Chapter 12 is a proceeding specially designed for farmers or fisherman. It has special provisions that are similar to a combination of Chapter 11 and Chapter 13.

Chapter 13: Chapter 13 is another type of bankruptcy proceeding. In Chapter 13 you must propose in good faith, a plan to pay all or part of your debts from future income over a period of time. If the court approves the plan of payment and all of the payments are made, the debts are settled in this manner, even if your creditors are not willing to go along with the plan. If you make the payments as required, you will not have to surrender your property to a trustee and you can keep everything that you own. Chapter 13 can only be used by an individual and only if your debts do not exceed certain limits. An individual engaged in business may use a Chapter 13 proceeding to pay business debts or settle them over a period of time while continuing to own and operate your business. There are some situations in which Chapter 13 may be more advantageous than a liquidating bankruptcy under Chapter 7. Chapter 13 may allow you to discharge debt which you may not be able to discharge or get rid of under Chapter 7.

We will discuss the options with you that fit your factual situation in order to help you make an informed legal choice.