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What Are The Differences Between Chapter 7, Chapter 11, and Chapter 13 Bankruptcies?

There are serious implications of filing for bankruptcy, no matter which Chapter you file. However, each Chapter is unique in its own way, so it’s important to understand the particular implications of each type before making the decision to file for a certain type of bankruptcy.

Here are the differences you should know:

Chapter 7

Chapter 7 bankruptcy is also known as “straight bankruptcy” or “traditional bankruptcy.” This type of bankruptcy allows you to liquidate your assets in order to pay off your creditors. When you liquidate your assets, it means that you sell them off in exchange for cash. The cash is then used to pay your creditors.

You won’t be able to sell the assets completely on your own, because a federal court trustee must supervise the sale of any assets that aren’t exempt (such as cars, work-related tools, and basic household furnishings). Whatever balance remains after your assets are sold and your creditors are paid will be eliminated.

Keep in mind that Chapter 7 can’t clear all debts. You will still be required to pay court-ordered alimony and child support, taxes, and student loans.

Chapter 7 can devastate the majority of your assets. You will most likely lose property and the damaging bankruptcy information will stay on your credit report for 10 years following the filing date. If you find yourself in debt again, you will not be able to file for bankruptcy under this chapter for eight years.

Chapter 11

Filing for Chapter 11 bankruptcy is best if your business makes money but you have mounting debt issues. It may be time to file if you’re having trouble making payments on time and you could potentially face legal actions by creditors.

This type of bankruptcy is often referred to as a “reorganization” bankruptcy because it allows you to restructure your debts, which enables you to keep your business in operation.

Chapter 11 provides a fresh start for your business. This type of bankruptcy allows you to negotiate new agreements and payment schedules with creditors.

Chapter 13

Chapter 13 allows you to keep your property as long as you partially or fully repay your debt. A three- to five-year repayment plan will be negotiated by your attorney and the court. Once your repayment plan is complete, your debt will be discharged, even if you did not repay the full amount you originally owed.

Chapter 13 allows you to retain more of your assets than Chapter 7, so it may be a better option if you’re able to repay at least a portion of your debt. Chapter 13 is also more favorable because it drops off of your credit report after seven years and you’re able to file again under this chapter in just two years.

If you’re afraid for your financial future, it may be time to file for bankruptcy. It is a big decision to make, and not one you should take lightly. Our experienced bankruptcy attorneys are highly skilled in this area of the law and can help you sort it all out. We have helped many other people just like you—let us see if we can help you, too.

Contact the experienced attorneys at Caddell Reynolds Law Firm by calling (800) 889-6944 or filling out our online contact form today.

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