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What Are the Different Types of Bankruptcy?

What Are the Different Types of Bankruptcy?

When financial burdens pile up and become unmanageable, you may consider bankruptcy to relieve your debts. When you file for bankruptcy, you can create a new financial strategy that helps you to restructure your finances. There are six main types of bankruptcies that you can file for which can aid you.

Different Types of Bankruptcy

When you learn more about the different types of bankruptcy cases you can file for, it will help you make an educated decision. You can consider Chapters 7, 9, 11, 12, 13, or 15. Speaking with a bankruptcy lawyer can help bring clarity to which bankruptcy you should file for.

Chapter 7 Bankruptcy

You may likely be considering Chapter 7 bankruptcy, as it is the most commonly used form of bankruptcy. This requires the sale of all your assets to cover all of the debt you still owe. Unsecured debt such as medical bills, credit cards, and more are erased. This doesn’t typically include taxes or student loans. It cannot stop a foreclosure but instead postpones it. You can’t keep anything you own unless you reaffirm the debt.

Chapter 9 Bankruptcy

This bankruptcy was created for organizations to restructure their debts so that it is more manageable. This is for cities, towns, school districts, and other establishments to be able to pay back what they owe and catch up on their debts.

Chapter 11 Bankruptcy

Corporations and businesses can file for this bankruptcy to help them create a payment plan that works for them. In this case, creditors and the court have to approve this financial plan. This works well for individuals who have too much debt to qualify for other forms of bankruptcy. It is for those who have high-value assets or properties, which is an option for celebrities or other high-profile individuals.

Chapter 12 Bankruptcy

Farmers and fishermen file for this type of bankruptcy to help them protect their property and their homes. This is great for families who are in the agricultural industry who need help with managing their debts. They are able to keep their assets while catching up on payments. It allows for higher debt limits, and is similar to the Chapter 13 bankruptcy but is slightly more flexible.

Chapter 13 Bankruptcy

This bankruptcy doesn’t forgive your debt, instead, it will help you create a new payment plan. With this type of bankruptcy, you pay back an agreed-upon amount on your unsecured debt. The secured debt you owe is then paid back over a three to five-year period. After you follow this payment plan successfully, the rest is forgiven. You have to follow a strict budget and manage your finances to not miss these payments. This will help you catch up on your debt that can’t be erased through bankruptcy.

Chapter 15 Bankruptcy

This type of bankruptcy has to do with international debt problems. It allows foreign debtors to file in U.S. bankruptcy courts. It is designed to help foreigners who need help managing their finances and who are struggling with their debt.

Learn More about Which Types of Bankruptcies You Can File For

If you need further guidance on what type of bankruptcy works for you, speak with a professional. A bankruptcy attorney can help you review your circumstances and help you make a decision.

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by Dirk DeBie // Contributor to Businessing Magazine.

Opinions expressed by contributors are their own.