Different Ways for Filing Bankruptcy… Under the United States Bankruptcy Code, citizens of the country can file for bankruptcy in four different ways: Chapter 7, Chapter 11, Chapter 12, or Chapter 13. Of the four types, Chapter 7 is the most common type of bankruptcy program. Different provisions and laws govern each of these bankruptcy forms; however, they address the same issue of helping citizens get over the debts they have incurred.
For Chapter 7 bankruptcy protection, liquidation of the debtor’s non-exempt assets is performed by the randomly assigned trustee. The proceeds from the liquidation process will be distributed by the trustee to your creditors and any remaining dischargeable debt after the pay off can be eliminated as deemed necessary by the trustee and you will have a fresh financial start. An automatic stay is imposed on creditors to prevent them from contacting you during the duration of the bankruptcy case and it is the trustee who acts in behalf of your creditors. This bankruptcy program is suitable for individuals whose monthly income is below the state median income level.
An alternative to Chapter 7 bankruptcy protection is Chapter 13. For those who do not qualify in the previous program, the court may recommend Chapter 13 to regular income earners whose monthly income exceeds the median income level of the state. The paperwork needed for this program is the same as in the previous chapter, save for the fact that you have to present a repayment plan to the court. This should be approved by the bankruptcy judge, and it is the trustee’s duty to oversee its implementation. The plan outlines in detail the debtor’s strategy to pay his debts in a 3- to 5-year period based on the means test. The same automatic stay applies for debtors filing under the Chapter 13 bankruptcy program where the creditors will not contact the debtor for 3 to 5 years and only the trustee will serve as the mediator between the two entities.
Chapter 11 bankruptcy protection is more or less similar to Chapter 13, but it also allows businesses to file for bankruptcy protection. Reorganization is implemented in this program in which the business or individual shall propose a bankruptcy plan. Creditors are given the chance to contest the debtor’s plan. If a business files for this type of bankruptcy, all kinds of executory contracts are cancelled by the court. The court has a special provision for this type of bankruptcy program with regard to an aircraft. If a business owns an aircraft during bankruptcy declaration, a secured creditor may take possession of this aircraft within 60 days of filing.
For the last bankruptcy chapter, Chapter 12 specializes in a special group of debtors. Chapter 12 helps a family farm recover financially through a reorganizational plan. The family farm may be in the form of a sole proprietorship or a corporation. The bankruptcy court helps a family farm recover from its debts while operating at the same time through a repayment plan presented to the trustee. This outlines the plan to pay all debts incurred by the family farm in a period of three to five years.
Before filing for any of these bankruptcy programs, be sure to consult a credit counselor or an expert bankruptcy lawyer to help you make the decision.