There are numerous different types of bankruptcy and bankruptcy law, including Chapter 7 bankruptcy, Chapter 11 bankruptcy and Chapter 13 bankruptcy. Chapter 7 and Chapter 13 bankruptcy are most common for individuals, while Chapter 11 is bankruptcy intended for businesses and companies. Arming yourself with the right resources surrounding the bankruptcy process will allow you to make educated decisions regarding your debt and personal finance, because bankruptcy is a serious legal process that cannot be undone once you begin the process.
Personal Bankruptcy
Also known as Consumer Bankruptcy, this pertains to individuals. Individuals may choose to file bankruptcy to resolve a seemingly hopeless financial situation, or to delay debt-collection for a period of time to allow for financial reorganization. Personal Bankruptcy generally takes one of two forms: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Chapter 7 Bankruptcy is a way for Debtors to get a "Fresh Start" and eliminate debt.
Chapter 7 bankruptcy is a solution for many people who simply have more unsecured debt than they can manage. Filing for Chapter 7 relief can provide discharge of many debts so you can start over and return to managing your basic financial obligations and goals. Often referred to as "debt liquidation" bankruptcy, a Chapter 7 filing is the most popular form of bankruptcy among consumers because it extinguishes your debts without repaying your creditors. Moreover, most of the consumers who file for Chapter 7 relief are able to keep all of their assets.
In order to qualify for Chapter 7 relief, a consumer must meet the "means test" which compares your income to your state's median income. Once you meet these criteria and a Chapter 7 petition is filed in bankruptcy court, you will obtain immediate relief from wage garnishments, frozen bank accounts, and creditor and collection harassment and legal proceedings. Depending on your financial circumstances, you may be able to keep vital property and assets such as your home, vehicle, life insurance policies and retirement accounts. So instead of draining these types of assets and borrowing from friends and family to make ends meet, consult with The Green Law Group to determine if Chapter 7 bankruptcy is a sensible alternative.
Chapter 13 is an option for those with good sources of income and real assets they do not want to lose. Chapter 13 provides for a reorganization of debts which help property owners keep their homes, cars and other valuable assets while managing other debts. By filing a Chapter 13 petition, you may be able to stop foreclosure, repossession, garnishments and lawsuits resulting from your debts. You may also significantly reduce or eliminate your credit card debts.
Business Bankruptcy
Any formalized entity of business can file for Chapter 11 bankruptcy in accordance to United States Bankruptcy Code Title 11, Chapter 11 and under the terms of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Included in the entities able to reorganize and restructure under Chapter 11 bankruptcy include:
- Sole Proprietorships
- Partnerships
- Limited Liability Partnerships
- Limited Liability Corporations
- Corporations
- Co-operatives and Non-Profits
When utilizing a Chapter 11 restructuring, companies face the prospect of continuing business in light of current debt obligations. For executives and employees, the possibility of maintaining jobs, an income source, and retaining all assets used in producing this income are all retained. Furthermore, companies have been known to emerge from Chapter 11 bankruptcy and regain full control of their enterprise once again rather than full liquidating their assets. A bankruptcy court will supervise a company under Chapter 11 bankruptcy, manage the organizations debt, and contract obligations. Under the guidance of federal law, bankruptcy courts can discharge certain debts and contractual obligations in certain circumstances. In other instances, creditors will entirely take over a company in the event the organization's debts outweigh the current assets.Under the mediation of the bankruptcy courts, creditors and debtor companies meet to discuss plans for reorganization and restructure. Typically, a debtor company has a specific period to offer a plan of reorganization, which will include methods to satisfy existing debts, cuts in expenditures, and potential incomes. Creditors will then vote to agree or disagree on the plan, or if no plan is presented, creditors have the opportunity to present their own agenda. The court will decide whether each party is receiving treatment in the fair and equitable interest of resolving the matter at hand.
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