Filing for bankruptcy can be stressful. When dealing with a potential bankruptcy or wondering how to file, it may feel overwhelming to figure out what types of bankruptcy there are and, even more importantly, know which one is the best choice for you. A bankruptcy lawyer will be key in navigating the process, from choosing the filing option to filing the appropriate paperwork and working with the court. Read below to learn more about the types of bankruptcy and discover how to work with a bankruptcy lawyer to select the right filing option.
In the United States, there are six types of bankruptcy: chapter 7, chapter 9, chapter 11, chapter 12, chapter 13 and chapter 15. Of these, people most commonly file for chapter 7 and chapter 13. It is important to understand the differences between each of these filing options.
This type is also known as liquidation bankruptcy because assets are liquidated (or sold) to pay off creditors. The court will appoint a trustee to the case who will handle the liquidation of assets and work directly with the creditors. In this case, much of people’s remaining debts, such as medical or credit card debts, are erased.
Depending on the state, the court cannot force the person filing to give up certain assets, such as their home or their cars, which makes this an attractive filing option for many. Many cases of chapter 7 are “non-asset” cases, meaning there is not enough value in the client’s assets to give up anything. Chapter 7 does, however, have certain eligibility criteria to file. Clients need to earn a certain income that is low enough to qualify.
This type of bankruptcy applies to municipalities such as school districts, towns, and cities. When municipalities file for bankruptcy with this option, they can gain temporary protection from their creditors while they set up a plan to pay back debts.
Chapter 11 bankruptcy generally applies to businesses and organizations. Similar to chapter 9, the business will use the filing to reorganize and figure out a way to pay off its debts. A court will be involved and the creditors will have to approve of the business’s plan. This option is used with individuals only in rare situations where the individual has a significant amount of highly valued assets, such as with professional athletes.
This bankruptcy filing option is specifically for farmers or fishermen who are in significant financial distress. It allows them to keep their assets that relate to their livelihood, such as their farms, and has higher debt limits than some of the other bankruptcy filing options.
Chapter 13 is one of the most common bankruptcy options. A court is once again involved. A trustee helps the client reorganize their debt and set up a payment plan. This way, the creditors are paid what they are owed over the course of three to five years. Similar to chapter 7, there are eligibility requirements for this filing option: clients have to have a certain amount of debt and a certain income level to qualify.
Chapter 15 deals with international cases of filing for bankruptcy. It applies to those who have debts with foreign creditors. Chapter 15 allows for collaboration between foreign debtors, foreign courts, and US courts.
While it is important for individuals filing for bankruptcy to be aware of the various options, it is even more important for them to work with a bankruptcy lawyer. Because the various options have so many small details, finding an experienced and highly qualified bankruptcy lawyer will make the process much easier for the client, giving them the results that they need to start fresh after filing for bankruptcy.
At Parker & DuFresne, we believe that bankruptcy is a chance for our clients to start on a clean slate to rebuild their lives—and their finances. We work in bankruptcy, foreclosure defense, family law, personal injury, and consumer protection. Our lawyers have quality education and experience in the multiple types of bankruptcy. We have a specific focus on chapters 7 and 13, which are most commonly for individuals. Visit our website at https://jaxlawcenter.com/ or call (904)606-9069 for a free consultation.
It’s important to hire an experienced bankruptcy lawyer when you’re considering filing for bankruptcy, or even if you are experiencing these warning signs.
This is because there are many different types of bankruptcy. Only an experienced lawyer will know which one would work best for your specific situation.
It might seem like it makes sense to do this yourself. But most people don’t have the time or patience to understand all of the details involved in bankruptcy. That means they make mistakes by not choosing the right type, or by not filling out paperwork correctly. Both things could lead to delays and ultimately hurt your chances of getting any debt relief at all.
This is not a journey to take lightly, but it is also not one to take alone. If you need to file for bankruptcy, reach out to us today to start your journey with us.
If you want to learn more about the options you have, call The Jax Law Center for a free consultation.
Parker and DuFresne