13 Feb Bankruptcy Basics: What Kinds of Bankruptcies Are There?
What Kinds of Bankruptcy Are There?
There are two main types of consumer bankruptcy: Chapter 7 and Chapter 13. (Two other chapters, Chapter 11 and Chapter 12, apply to corporations and people who don’t qualify for a Chapter 13, and to family farmers, while the rarely used Chapter 9 and Chapter 15 apply to municipal and international cases.)
Chapter 7 is what most people think of when they think of bankruptcy. All of the debtor’s assets—with the exception of exempt items or assets with no equity—can be sold and the proceeds are distributed among the creditors. A typical Chapter 7 bankruptcy will last about four months from filing to discharge.
Chapter 13 provides a way for you to pay back your creditors, in whole or in part, usually over five years. You must have less than $307,675 in unsecured debt (such as credit cards and doctor’s bills) and less than $922,975 in secured debt (such as mortgages and car loans) to qualify for Chapter 13. Due to the Court-approved payment plan, a Chapter 13 bankruptcy will usually last five years, although attorney involvement usually ends after about four months. In many cases, no interest will be paid on the amounts being repaid through the Chapter 13 Plan, you pay your unsecured creditors only pennies on the dollar, and you keep all of your assets.
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