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Once you’ve made the decision to file for bankruptcy, you’ll need to determine which type of bankruptcy is best for you and your financial situation. If you’re an individual or small business owner, it’s likely that you’ll be filing either a Chapter 7 or Chapter 13 bankruptcy. For corporations or partnerships that are struggling, Chapter 11 may be a more suitable solution. In this blog, our Northbrook bankruptcy attorney explains each type of bankruptcy.
In a Chapter 7 bankruptcy, the debtor turns over his or her assets to a trustee assigned to your bankruptcy case. The trustee will then liquidate your assets and pay the creditors as much as possible. Any property that is considered nonexempt will be sold by the trustee and the money paid for the property and assets will be used to pay creditors as well. It’s important to note that not everyone is eligible for Chapter 7 bankruptcy – you must first take the “means test” to qualify. If the test determines that your income is lower than the median income of the state in which you reside, you pass the means test and are thus eligible for Chapter 7 bankruptcy. This type of bankruptcy can be filed rather quickly and can take three to four months to complete.
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy is ideally for debtors who can afford to pay something to their creditors. This type of bankruptcy is often referred to as “Individual Debt Adjustment,” and usually includes a repayment plan – the debtor will only need to pay creditors what they are able to afford, as long as the creditors are receiving what they would have received in a Chapter 7 bankruptcy. The repayment plan will typically last three to five years, depending on your income. At the end, many of your unsecured debts will be discharged.
The purpose of Chapter 11 Bankruptcy is to allow a business who has the potential for success to reorganize their debts and submit a repayment plan in order to gain control of their debt and how much they owe. Under this type of bankruptcy, debtors find that repaying creditors is more manageable and less overwhelming.
Because of the inherent complexities of bankruptcy, it’s imperative that you do not face the bankruptcy process without representation from Bach Law Offices. When life throws you a curveball, you can trust that Attorneys Penelope and Paul Bach are there by your side to help you manage the financial strains you face.
To learn how we can help, call (847) 440-5998 today and speak to a trusted Northbrook bankruptcy lawyer.