Different Types Of Bankruptcies For Individuals – When debts keep piling up and you or your business can’t keep up, filing for bankruptcy may be the best option. While it can be uncomfortable, stressful, and confusing for many, a guide to the different types of bankruptcy can help you understand the process and what comes next.
When you hear about bankruptcy in the news, you’ll hear it referred to as a “13.” Chapter” or “11. Chapter This refers to various sections of the federal bankruptcy code, 11 United States Code (U.S.C.). Each defines a different type of bankruptcy as it applies to individuals, businesses, farmers, and even municipalities. These rules also cover international insolvency to provide international creditors with a remedy when debtors cannot pay the debts they owe.
Different Types Of Bankruptcies For Individuals
Many residents of the Texas Panhandle are facing mounting debt and a sense of panic as creditors continue to demand payment. If you’re struggling with debt, don’t worry—you have a lawyer nearby who can help.
Bankruptcy In The Us: How Many Companies File For Chapter 7, Chapter 11, And Chapter 13?
Contact an experienced bankruptcy attorney in Amarillo by contacting The Northern Law Firm. Get advice on the different types of bankruptcy and what path may be best for you to return to financial stability.
It’s true that filing for bankruptcy affects your credit score, and the effects can last for years. But if you see no other way out, bankruptcy can give you a chance to start over.
Many people think that bankruptcy means losing everything you own, but that’s not the case. There are two types of bankruptcy which apply to individuals and another which applies to businesses. Generally, these fall into the liquidation, repayment, or reorganization category and fall under different sections of US bankruptcy law.
Liquidation means selling assets to pay debts. Repayment is exactly what it sounds like: the bankruptcy court sets a repayment schedule to ensure that creditors receive what they owe you within a certain period of time.
What Are The Most Common Bankruptcies
Restructuring applies to businesses, allowing them to “restructure” their debts in order to pay their creditors without losing their business.
States also have their own bankruptcy and estate laws. This can specify what kind of property a bankrupt person or couple can keep in bankruptcy and what they need to sell to pay off debts.
Individuals who do not earn enough to pay off their debts may choose to file for Chapter 7 bankruptcy, using the “average” test to determine whether you have enough income to pay off your debts. By comparing income to the state average and your debt to yourself. Income Chapter 7 is a liquidation-type bankruptcy. When you file for Chapter 7 bankruptcy, the court will appoint a trustee to oversee the sale of all your non-exempt assets.
Exempt property is property that you are allowed to own, which can include many things in Texas. Exempt property in Texas can include your home or the amount of equity you have in your home, your car, some of your livestock, clothing, firearms, and some family heirlooms. Some of your personal assets will have a ceiling on their value that is exempt from bankruptcy.
Chapter 13 Bankruptcy For Beginners
A court can discharge “unsecured” debt (your debt that isn’t backed by property, such as a home, RV, or car). That may be a big relief for people who have racked up credit card bills they can’t handle, but the damage to their credit scores will stay with them for years.
When you file for Chapter 7, your financial life becomes an open book to your creditors, who have the opportunity to ask you about your finances and your debts. Although you no longer owe the debt, your co-signers, if you have one, will, and creditors may continue to pursue them for payment.
Some businesses, such as sole proprietorships, may file for Chapter 7 if the business is not expected to continue operating.
Everyone’s situation is different, so it’s important to get advice from an experienced Texas bankruptcy attorney to help you determine your eligibility for Chapter 7 bankruptcy and what property may be exempt. Unforgiven student loans and taxes are never forgiven—you have to pay them back. Chapter 7 bankruptcy stays on your credit report for up to 10 years.
Mortgage Guidelines On Types Of Bankruptcies
Individuals who have enough money to pay their debts can file for Chapter 13 bankruptcy, in this type of bankruptcy, the court requires monthly payments for a specified period of time, usually no more than five years. The time limit means that monthly payments can be much higher.
The repayment will include some or all of your unsecured debt. Chapter 13 bankruptcy is essentially debt “restructuring” for an individual, and the courts will monitor your spending and require you to adhere to a strict budget during the repayment period. The amount you have to pay depends on your income, your debts and your assets.
Keeping your assets is a relief, but having the court watching over your shoulder at your expenses is no fun. But whether it’s due to job loss, a medical emergency, or something else, Chapter 13 gives you a road map to debt repayment.
The limit for you to be eligible to file for Chapter 13 bankruptcy is that your unsecured debt must be less than $465,275 and your secured debt, such as a mortgage, must be less than $1,395,875. The Bankruptcy Act sets this amount in April 2022 and can be changed by the courts under a three-year plan.
When To Declare Bankruptcy
Unlike Chapter 7, where you face direct hearings from your creditors even though the trustee is administering the bankruptcy, Chapter 13 sets up a repayment plan where the debtor pays creditors through the trustee. Once the court approves Chapter 13 bankruptcy, creditors cannot go after you for payment.
Corporations, businesses including some partnerships, and some wealthy individuals with debts too high to qualify for Chapter 13 can also file under Chapter 11. This section of the bankruptcy code allows business to continue.
Both the court and the company’s creditors must agree to a plan that shows how the company will continue to operate while paying off its debts.
This is a special type of bankruptcy for family farms, ranches, and fisheries that can help them stay in business while paying off debts. It works the same way as Chapter 13, but the debt limit is much higher to qualify. Chapter 12 is an uncommon type of bankruptcy, but not uncommon for small farming cases. If your farm or ranch is facing debt challenges, talk to your attorney about whether your business qualifies for Chapter 12 bankruptcy.
How Many Times Can You File Bankruptcy? Oaktree Law
Northern Law Firm is here to help you through tough financial times. Contact us today so we can help you decide if bankruptcy may be the best option for you or your business. This page is a summary of this topic. It is a compilation of various blogs that cover it. Each title is linked to the original blog.
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