Types of Bankruptcy
If you are dealing with a difficult financial situation, you may be facing significant debt and unsure of what to do. But you don’t have to endure this situation alone. Speak a bankruptcy attorney who can help you understand your legal options. Contact the Law Office of Diane Anderson to find out how we can help you.
Bankruptcy is a way that you can eliminate or manage your debt if it has become overwhelming. Legally, you can do away with or reorganize the majority of your debts through the legal process of bankruptcy.
We explain the types of bankruptcy options available to those considering bankruptcy below.
Chapter 7 allows debtors in financial difficulty who do not have the ability to pay to discharge their debts. Under Chapter 7, you may claim certain property exempt (that is, you can keep the property) and a trustee may take possession of the remaining assets in order to liquidate them and pay your creditors according to priorities set forth in the Bankruptcy Code. In most cases, the debtor does not lose any property. See the United States Trustee’s Bankruptcy Information Sheet.
Chapter 7 bankruptcy allows you to liquidate, or sell, most of your property in order to pay back creditors. However, you may also be able to completely eliminate, or discharge, the majority of your debt. Chapter 7 is one of the most popular forms of bankruptcy because it provides a quick and easy answer to your debts.
How Do I Qualify for Chapter 7 Bankruptcy?
Before you can file Chapter 7, you must make sure you qualify through the Means Test. The Chapter 7 Means Test considers your income to determine if you make a low enough amount to qualify to file Chapter 7. If you make too much, then you may be able to file Chapter 13 or another form of bankruptcy. Your bankruptcy attorney can help you evaluate the Means Test and determine if you qualify.
How Long Does Chapter 7 Take?
With the help of a Chapter 7 bankruptcy attorney, your bankruptcy may take between four and six months to complete. This includes filing official documents, attending hearings, and finalizing your bankruptcy. It can take longer if your creditors dispute a discharge or if you fail to provide complete information in the filing process. Work with a bankruptcy attorney who can help you expedite the process.
Chapter 13 allows individuals who are temporarily unable to pay their debts to pay them in installments over a period of time. This type of bankruptcy is often called “reorganization bankruptcy” because it involves organizing your debts into a manageable payment plan that lasts for three to five years. You should be able to keep most of your property through Chapter 13, but simply extend or decrease payments.
How to Qualify for Chapter 13 Bankruptcy
You do not have to take a Means Test to qualify for Chapter 13. Instead, you must meet requirements about the types of debt and how much you have. However, those amounts change annually. It’s best to work with a bankruptcy attorney to determine if you qualify according to the types of debt and how much you have.
How Long Does Chapter 13 Bankruptcy Take?
A Chapter 13 bankruptcy can take a longer period of time to complete; however, that time is usually extended to allow you extra time to pay off your debts. Through Chapter 13 you will establish a payment plan that can take between three and five years to complete. The majority of your bankruptcy activity will take place within the first six months, and the following years will be simply paying on your payment plan. However, your bankruptcy will not be completed until the three to five year payment plan is complete. A bankruptcy attorney can help you develop a payment plan that works with your budget and allows you to repay your debts appropriately.
Chapter 11 Bankruptcy: Reorganization
Chapter 11 is designed primarily for the reorganization of a business. Its provisions are very complex and should be done only after consulting an attorney.
Who Can File Chapter 11 Bankruptcy?
In order to qualify for Chapter 11 bankruptcy, you must be “domiciled,” or incorporated or otherwise organized. This typically applies only to businesses. However, an individual may utilize Chapter 11 if they have too much debt to qualify for a Chapter 7 or Chapter 13 bankruptcy.
You should consult a Chapter 11 bankruptcy attorney before deciding which type of bankruptcy is best for you. Although Chapter 11 can be very helpful for businesses or those with large amounts of debt, another form of bankruptcy might be best for you.
How Long Does Chapter 11 Bankruptcy Take?
There is no specific time limit for Chapter 11 bankruptcy; however, these cases generally take between six months and two years. In many situations, a business can continue to operate while filing Chapter 11. The business may reorganize itself and its debts through the Chapter 11 process. A bankruptcy attorney can explain the Chapter 11 process and help you understand the timeline.
Chapter 12: Family Farm
Chapter 12 is designed to permit family farms to repay their debts over a period of time.
Family farms and family fisherman who operate family owned businesses can utilize Chapter 12 as a bankruptcy option. This allows farmers to restructure finances instead of liquidating assets and foreclosing on property. Chapter 12 bankruptcy is similar to Chapter 13, but provides additional benefits to family owned organizations.
Who Qualifies for Chapter 12 Bankruptcy?
Individuals (single or married), corporations, and partnerships that identify as family farmers or family fishermen may file Chapter 12 bankruptcy if the meet the following qualifications. They:
- Are engaged in a commercial farming or fishing operation;
- Have debts under a certain amount (that changes annually); and
- Get at least half of their gross income from commercial farming and/or fishing operations.
If the operation is a corporation or partnership, then a single family must own more than 50 percent of the stock or equity interest in the organization.
How Long Does Chapter 12 Bankruptcy Take?
Like Chapter 13, Chapter 12 bankruptcy involves a three to five year payment plan. Thus, the bankruptcy may take up to five years to complete. Although, most of the restructuring of finances and organizing of debts would take place within the first six months. Once the court approves a payment plan, the debtor would simply make payments according to a schedule. A bankruptcy attorney can help you manage your debt through Chapter 12 quickly.
What Types of Debts Can Be Included in a Chapter 12 Bankruptcy?
Because a Chapter 12 bankruptcy involves a family organization, you can include debts associated with the business or the family. You are not as restricted to individual debts like in Chapter 7 or organizational debts like in Chapter 11. You can include debts that were incurred to cover the following:
- Expenses for your business; and
- Expenses related to the maintenance and support of the debtor’s family.
It’s best to work with a bankruptcy attorney who can review your debts and help you determine what qualifies to be included in a Chapter 12 bankruptcy.
Contact a Bankruptcy Attorney For More Information Today
If you are dealing with debt that seems unmanageable, contact a lawyer who can help you understand your options and eliminate your debt. The Law Office of Diane Anderson has worked with countless clients who are facing overwhelming debt. We can help you find a solution and start over. Call us today.