What are chapter 7 bankruptcy, chapter 13 and chapter 11?
Contrary to common beliefs, bankruptcy does not mean the “end” of normal life. In certain circumstances filing for bankruptcy can stand the real remedy and the best option in critical financial situation. It allows you to avoid creditors’ clams and cancel all (or the lion part) of your debts.
Many have heard about the types of bankruptcy, called chapters, but the question is what is the difference between chapter 7 bankruptcy and, let’s say, chapter 13?
What rights do I gain and what problems do I get rid of by filing for chapter 11?
Before we’ll show the difference you should note that success of the process directly depends on the professionalism of all related paperwork and on accuracy of the included data. So, at first, answer the important question: can you accomplish filing process by yourself or should you better use a professional service of the bankruptcy attorney?
Let’s consider the filing for chapter 7 and the cases where the bankruptcy is advised or even necessary.
Like the 13th one, chapter 7 applies mainly to individuals who need an urgent relief of debts they unable to pay. However, there is a significant difference between two of them and when you decide to start filing for bankruptcy, this difference is obligatory to understand.
By filing for bankruptcy chapter 7, also called liquidation bankruptcy, one can receive an immediate debts cancel when the process is completed. This chapter is most favorable for the individuals. The process is usually easy, short and lasts up to a half a year. The Trustee (normally a bankruptcy lawyer, approved by the court) manages to deal with the debtor’s assets (exempt and non-exempt), making sure all interests of his client and the creditors are protected. Lawyer is also responsible for accuracy of all given information, regarding the debtor.
Chapter 7 gives the debtor a right to list any amount and type of debts, which were qualified through the “Means Test”.
A Chapter 11 bankruptcy mainly applies to companies rather than to individuals. Chapter 11, known as bankruptcy reorganization, allows business entities to restructure their debts with the right to repay it later and in another form. A filed petition goes to the bankruptcy court where the company (the debtor) should provide all financial information to prove its insolvency.
The benefit of the 11th chapter is that in spite of the right to restructure the debts, the company may still run the business, in accordance with the court’s decision and statements.
Chapter 13 bankruptcy is also applied to individuals and means restructure of the debt, instead of its full liquidation as it happens when filing for chapter 7. The court gives the debtor the right to work through his financial issued during the certain period (like 3 or 4 years) in order to repay the creditors full amount of debts.
With the professional help of bankruptcy lawyers you’ll find the best solution for your current situation!