Personal bankruptcy usually falls under one of these two types. Chapter 7, or liquidation bankruptcy, and Chapter 13, reorganization bankruptcy. Business bankruptcies generally fall under Chapter 11 that is also a reorganization bankruptcy and Chapter 12 bankruptcy for family fishermen or family farms, which is much like Chapter 13 and Chapter 11 bankruptcies.
Chapter 7 Bankruptcy
In Chapter 7 bankruptcies you eliminate all of your qualifying debt in a relatively short amount of time, usually anywhere from three to six months. A court-appointed trustee will examine your assets, your debt, and your income. The trustee will determine if anything can be sold for the benefit of the creditors. In most cases, filers do not lose any of their property due to generous exemptions in either state or federal bankruptcy laws. A bankruptcy attorney can advise you on which exemptions will be best for your situation. You can not use both state and federal, and you must choose one over the other. This type of bankruptcy is best if you have more unsecured debt such as credit cards, medical bills, payday loans, and sometimes old tax debt.
Chapter 13 Bankruptcy
Chapter 13 bankruptcies differ in Chapter 7 in that you will be able to keep all of your assets and make payments on your overdue debt. The trustee will go over the repayment plan that you and your attorney have prepared and most likely approve. The repayment plan will be for a set period between three to five years, and you will make payments directly to the trustee.
This type of bankruptcy benefits people with secured debt such as a home mortgage or vehicles they want to keep. The repayment amounts will often time be lower than the original payments. Once you have made the required payments, you are entitled to discharge like in Chapter 7 bankruptcy. Any remaining debt will be eliminated after the predetermined repayment period. You must continue to make payments on your home and your car if you plan to keep those secured assets.
If you are unsure as to what would be the best type of bankruptcy for you, contact a Rio Grande bankruptcy attorney to discuss your unique financial situation.