Type of Bankruptcy
You Should File
Bankruptcy is a court process through which debtors (individuals or businesses) can discharge or restructure their debt. There are three main types of bankruptcy – Chapter 7, Chapter 11, and Chapter 13. While these each have their own rules, they all have one goal in common – providing reasonable and manageable debt relief.
At The Law Office of Erika Luna, one of the most common questions we receive is, “what type of bankruptcy should I file?” The answer to that question depends on the facts of each individual who asks.
Chapter 7
Bankruptcy
Chapter 7 bankruptcy is a common choice for individuals and businesses who want to use their assets to help them pay their debts. Chapter 7 is not a repayment plan. Instead, you liquidate (sell) assets in order to pay back your creditors. With Chapter 7, your assets will be categorized as exempt or non-exempt. Exempt assets cannot be sold as a means of paying creditors.
Chapter 11
Bankruptcy
Chapter 11 bankruptcy is most commonly filed by businesses. During Chapter 11, your business can stay open and active. You have the ability to restructure your debt and assets and establish a plan to pay your creditors over time. Chapter 11 is most useful for businesses or corporations that have a healthy income and need help in restructuring their business finances.
Chapter 13
Bankruptcy
Chapter 13 bankruptcy reorganizes your debt and establishes a payment plan. During the repayment plan, you pay back a portion of your debts, and any debt remaining is discharged. Chapter 13 is most often filed by individuals who want to pay a part of their debt but need a flexible payment arrangement. Chapter 13 does not require you to sell any assets in order to pay your creditors.
Which Type of Bankruptcy
is Right for You?
The best way to determine which type of bankruptcy may be right for you is to contact a bankruptcy attorney. At The Law Office of Erika Luna, our bankruptcy attorney has been helping clients find debt relief through bankruptcy for more than a decade. She takes a compassionate and understanding approach to bankruptcy that allows her clients to stay focused on their dreams of financial freedom.