Bankruptcy is the term for when people can no longer pay their debts and must file for bankruptcy to find a way to repay their creditors. There are many reasons why someone may find themselves in this predicament. They may be going through some major life-changing issues that are family-related or health-related or they may just be poor in their financial decisions and are in need of assistance. Companies and large organizations are also susceptible to bad financial decisions or changes in the economy that may leave them with financial issues and the need to file for bankruptcy. Let’s take a look at the different types of bankruptcy and which one is advised for different entities and circumstances according to a bankruptcy lawyer.
Different Types of Bankruptcy
There are a few different types of bankruptcies that either an individual or a business can file for. Some of these are related to certain kinds of industries and others are for other types of entities or individuals. These are the different types of bankruptcy:
- Chapter 7 – This is the most common form of bankruptcy and is filed by individuals. Liquidation is required in this type but some assets are typically kept like a car or home that is primarily used.
- Chapter 13 – This type of bankruptcy is also filed by individuals but instead of liquidating assets a repayment plan of a 3-5 year term is established between the debtor and creditor.
- Chapter 9 – Chapter 9 is reserved for municipalities. This means a school district, county, city, or township may file for this type of bankruptcy. It is filed when a municipality is in financial distress. The municipality will work with creditors to establish a repayment plan but this almost always does not include any liquidating.
- Chapter 11 – Chapter 11 is filed by organizations or companies that need to reorganize their finances and debts. They are able to remain in business and operate accordingly while repaying their debts to creditors.
- Chapter 12 – This bankruptcy type is for fishermen or farmers of family-owned entities or corporate ones. The fishermen or farmers will get to keep their assets and not liquidate them while coming up with a repayment plan for their debts.
- Chapter 15 – This is the newest form of bankruptcy that someone can file for. It was added back in 2005 and is used for international purposes. For example, if there is a debt or finance issue that crosses multiple countries including the United States this bankruptcy type may be filed for.
Legal assistance is available for bankruptcy with lawyers who work in the realm of bankruptcy that understand the nuances and details of these filings and can offer their sound guidance and support throughout the process. Obtaining legal help can make the proceedings of bankruptcy easier and may even help the terms to be favorable for repayment.