Bankruptcy Options - 7, 11, and 13
Bankruptcy: the word alone may send chills up your spine. But so should the words "debt", "foreclosure", and "repossession". While bankruptcy may seem undesirable, intimidating, or downright embarrassing, in some instances bankruptcy can be a useful tool and may save you from a life mired in debt. Bankruptcy under chapters 7, 11, and 13 are available to both individuals and businesses, each with its own advantages and disadvantages.
Chapter 7 is a liquidation bankruptcy. This means that, as an individual or business, when you file for Chapter 7 you agree to have some of your property liquidated to pay off your debts. Businesses that file for Chapter 7 will be dissolved and the assets liquidated to creditors. For individuals, some assets may be exempt, such as your home, tools of your trade, and retirement accounts. The laws for exempt assets vary from state to state. All nonexempt items, however, are at risk of being liquidated under Chapter 7. While you may lose a significant amount of property, your debts will be immediately resolved and you can quickly begin to restructure your finances without the burden of debt.
Chapter 11 is a form of bankruptcy that is typically utilized by business entities, not individuals. This bankruptcy option allows a business to restructure and attempt to become profitable again. A business that files for Chapter 11 is not dissolved but instead continues day-to-day operations. The business must submit a reorganization plan to the court and have the plan approved. The business will then be allowed to reorganize and implement the reorganization plan, which is typically carried out over a period of a few months. If the plan is successful, the business will have been saved, debts will have been paid down, and it will once again be profitable. If Chapter 11 fails, a business may be forced to liquidate to pay off large debts to creditors.
Chapter 13 is known as the wage earner's plan because it is typically implemented by individuals with a regular wage or income. In fact, to qualify for Chapter 13, an individual must have a regular, reliable source of income that they can use to pay back their debts. If a person is eligible for Chapter 13, he or she will draft a debt repayment plan. The plan will specify how often the debtor will make payments (usually bimonthly or monthly) and how much the debtor can afford to set aside for each payment. This will determine how quickly a debtor can pay back creditors. In most cases the plan is expected to be completed within 3 to 5 years. If you can afford it, this is a good option because you will not have to give up your property for payment.
For More Information
While many people think of bankruptcy as a single action, bankruptcy actually includes a number of different options for debtors to choose from. When used properly, bankruptcy can save your financial future and help you become debt free.
To learn more about bankruptcy options available to you, please visit the website of experienced New Orleans bankruptcy attorneys Kervin & Young, LLC today.
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