Understanding the Different Types of Bankruptcy
Bankruptcy can be a viable solution for helping individuals and businesses eliminate or restructure debts that they can’t afford to repay. However, there are consequences. A bankruptcy can remain on credit reports for up to a decade, which makes getting a loan difficult. For some, the benefits outweigh the drawbacks, but it’s important to understand each type of bankruptcy before making a decision.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy can discharge most unsecured debts. Secured debts, including alimony, child support, taxes, and student loans, cannot be discharged. Chapter 7 bankruptcy can temporarily stop the foreclosure process, but debtors will need to catch up on their mortgage payments to avoid losing their homes. People whose income is above the state median may not qualify, and debtors choosing Chapter 7 won’t be able to file for this type of bankruptcy again for eight years. The process takes about four months to complete, and some assets may have to be sold to help repay creditors.
Chapter 13 Bankruptcy
Under Chapter 13 bankruptcy, debtors set up a payment plan to repay all or most of their debts. Payments will be made over three or five years. Most remaining unsecured debts will be discharged after the repayment period. This type of bankruptcy allows debtors to keep their assets. It can also put a stop to the foreclosure process, allowing past-due mortgage payments to be made through the repayment plan. There are no income limitations for Chapter 13 bankruptcies, but secured and unsecured debts can’t exceed certain amounts. This form of bankruptcy falls off of a debtor’s credit report after seven years and can be filed for again in two years. Individuals considering Chapter 13 bankruptcy should hire a bankruptcy attorney to help them submit their repayment plans in court.
Chapter 11 and Chapter 12
Two additional types of bankruptcy, Chapter 11 and Chapter 12, also seek to eliminate or restructure debt. Corporations and large businesses typically file for Chapter 11 bankruptcies; while farmers and fishermen generally choose Chapter 12 because of its higher debt limits, flexible repayment plans, and other benefits.
Are You Considering Filing for Bankruptcy?
Despite the prevalence of misinformation about bankruptcy, it can be a useful tool. If you’re looking for a way to restructure your debt, let attorney Stephen P. Levesque help you decide if bankruptcy is your best option. He can answer your questions, recommend a course of action, and help you navigate the legal process. To schedule a consultation, call The Law Offices of Stephen P. Levesque at (401) 490-4900 or contact us online.