Contrary to popular belief, bankruptcy does not refer to one process. Rather, there are several different ways in which you can complete the process. If you’re considering bankruptcy, it’s important to know about all of the different options. Learn more about the different types of bankruptcy and which one is right for you.
1. Chapter 7 Bankruptcy
This is one of the more simple and rapid types of bankruptcy. To achieve this type of bankruptcy, you must give all of your non-exempt property to a bankruptcy trustee. Typically, your home, books, and trade tools fall under exemptions.
The trustee liquidates your property and uses it to pay your creditors. In some cases, the creditors may discharge the leftover debt. Student loans, spousal support, and child support cannot be discharged.
2. Chapter 13 Bankruptcy
Another common form of bankruptcy is known as Chapter 13. With this type, you receive a plan to repay your debts to creditors. The plan considers your income and expenses, and only requires you to pay an affordable amount.
Your plan could pay off in the debt in either three or five years. Typically, individuals with low incomes pay off debt in three years. Meanwhile, those with higher incomes get five-year plans.
Instead of directly paying the creditors, you pay a trustee who makes the payments for you. After the term, your remaining debt is discharged. However, only individuals with less than a certain amount of debt can take advantage of a Chapter 13 bankruptcy.
3. Chapter 11 Bankruptcy
Although businesses can use Chapter 7, they must stop operating as a business entity. This makes Chapter 11 a common choice for failing business owners. With this type of bankruptcy, the business can remain in operation.
During the bankruptcy, a trustee has the ability to run your business. You and your business get a stay until the case is resolved. Similar to a Chapter 13, this type of bankruptcy often involves a repayment plan or a restructuring of the company. Creditors need to agree upon your plan, and this can make the process lengthy.
In some cases, a business may own more than they have in assets. Unfortunately, this could mean the business is restructured in a way that creditors own the business.
Choosing the Right Type of Bankruptcy
There are other types of bankruptcy. For instance, a Chapter 12 bankruptcy is for those who are in the fishing or agriculture industry. The many forms of bankruptcy make it difficult for individuals to get started on the process.
Before you start the process, you need to think about your options. Each type of bankruptcy comes with different consequences. While all types will impact your life, some will impact it more than others.
In Washington, bankruptcy is more common than you might imagine. One of the counties in the state appeared on a list of counties with the highest bankruptcy rates. Throughout the state, many people struggle to stay afloat. Work with an attorney and you may be able to overcome your financial troubles.
To best understand which bankruptcy is right for you, contact Ken Schneider – Bankruptcy lawyer in Washington. The only way to fully comprehend the impact of bankruptcy is to speak to an experienced attorney. They can help you learn more about your options. Then, they can take you through the process. You increase your chances of success and give yourself a more secure future.
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