Choose the Right Bankruptcy Option for Your Needs
When it comes to picking which bankruptcy option to select, there are several forms to choose from. The most common options include Chapter 7, Chapter 11 and Chapter 13, but there are also other types of bankruptcy filing options like Chapter 9 and Chapter 12, as well. Here, we will examine each kind of bankruptcy option so that the consumer can have an easier time of choosing an option that suits his or her specific needs.
Some consumers opt for the Chapter 7 bankruptcy option: this form of bankruptcy allows for the consumer to wipe out all applicable debts and once filed, the bill collectors can no longer take action against the consumer. This form of bankruptcy is often a last resort option since the consumer is at risk of losing any and all assets when he or she files for Chapter 7; some possessions may have to be sold off in order to make some kind of payment on existing debt.
What’s more, not every consumer is instantly eligible for Chapter 7 bankruptcy; the consumer has to endure a “means test,” which indicates whether or not he or she has enough financial resources to make other forms of bankruptcy filing more feasible. A “means test,” is income based, and it includes an assessment of what the consumer has made within the past six months. If the consumer is not making enough monies to pay off debts over a five year plan, then the consumer can go ahead with the Chapter 7 bankruptcy filing option.
When it comes to Chapter 9 bankruptcy, very few consumers will turn to such an option; this bankruptcy option is used solely by municipalities that have accrued a lot of debt, but that lack the necessary assets to sell in order to pay off existing debts. This option may be utilized by professional fishing companies or agricultural-based businesses. If this bankruptcy option is selected, the court will establish a special plan with the business owner so that debts can be repaid over time.
In terms of Chapter 11 bankruptcy; this form of bankruptcy is utilized by companies looking to reorganize accumulated debts. This form of bankruptcy allows companies to pay off some debts while actually getting other, selected debts discharged. The current financial position of the company is fully assessed before the filing is completed, and allows for the company to continue paying select creditors. Meanwhile, just as Chapter 9 bankruptcy exists for agricultural-based businesses and fishing companies, Chapter 12 is an alternative form of bankruptcy for such companies. The business and its assets remain intact as the business owner works out a repayment plan via the court to pay off existing debts. A trustee is used to ensure that debts are paid and monies are properly distributed to various debtors. In general, this option allows for the repayment of debts, at a fraction of the debt, over a five year period of time.
The Chapter 13 bankruptcy option is yet another filing option for consumers; this form of bankruptcy is akin to Chapter 12, but is used by the individual consumer or other businesses instead of fishing and agricultural companies. With this filing option, the consumer determines what debts are owed, and if the consumer is financially capable of engaging in a 5 year repayment plan, than he or she is eligible for filing this kind of bankruptcy. Again, a trustee is specifically assigned in order to control repayments, and the consumer pays the trustee a specified amount of money every month. That money is then passed on to debtors based upon the amount decided by the court. This kind of bankruptcy allows for the consumer to keep his or her assets as debts are eventually paid.
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