We hear about bankruptcies all the time, but many of us fail to understand what it actually means and what the implications are between them all. Well, we’re here to put that to rest. Rather than make your head spin trying to understand the differences between Chapter 7, Chapter 11, and Chapter 13 bankruptcy we thought we’d create an easy-to-understand guide.

Chapter 7 Bankruptcy Doesn’t Require Repayment (with Caveats)

Chapter 7 allows one to discharge your legal responsibility to pay your outstanding obligations.  An individual who files chapter 11 is allowed to protect certain assets ( exempt the assets ) from a potential distribution.   A good faith debtor obtains a discharge to get a fresh start. 

Not everyone is eligible for Chapter 7; eligibility is determined by income based on family size. Part of our analysis is to determine whether you are eligible to file a Chapter 7.  

Do you need help determining your eligibility for Chapter 7? Are you experiencing financial stress reach out to us today to help navigate this process.

Chapter 11 Bankruptcy is for Business Reorganization

Think of Chapter 11 bankruptcy as a “time-out” for your business debts. The process of Chapter 11 gives you pause to rethink your business strategy, re-organize and begin paying back debts and gives you peace of mind and silence from debtors in the process.  Businesses that need time to reorganize and have a sound business plan can benefit from a Chapter 11 which allow you to reset the business and through a plan of reorganization emerge from Chapter 11.  

Chapter 11 is much more complicated (and useful) than this simple explanation. If you’re interested in filing for Chapter 11, then reach out to us today.

Chapter 13 Bankruptcy Acts as a Good-Faith Repayment Plan

Chapter 13 can be a great alternative if you’re not eligible for Chapter 7. What Chapter 13 is, to keep things simple, is a restructuring of your debt payments into something viable to you based on your ability to pay.

With Chapter 13 you work with a court-appointed Trustee and submit a repayment plan to the courts. This plan will outline your debts, organized by priority, with a repayment plan for each. While secured debts (like auto loans) are expected to be paid in full, many other debts (like medical bills) have the potential to only need to be partially paid.

Chapter 13 is a way to take a breather and take control of how much of your income you’re expected to sacrifice in the name of debt collection.

Are you interested in Chapter 13? Maybe you need help with a repayment strategy. Reach out to us today.