When people have large debts that they can’t repay, when they are behind in their mortgage payments and danger of foreclosure, declaring bankruptcy might be the answer. Bankruptcy can, in some cases, reduce or even eliminate your debts, save your home and keep bill collectors away,
Federal courts handle bankruptcy, there are six types of bankruptcy, the two most common types for personal bankruptcy are Chapter 7 and Chapter 13, these chapters are named after the respective sections of the Federal Bankruptcy Code. For businesses bankruptcies, there is Chapter 11, which is much more well-known for making the headlines when big companies get into financial trouble.
The Main Differences Between Chapter 7, 13, and 11
People often file for bankruptcy when they have no way to meet their debt obligations. The widespread assumption would be that people who file bankruptcy are bad at dealing with money or people who take too much credit, but most of the time, that’s not the case. People usually file bankruptcy after a major financial blow, sometimes a lawsuit debacle or unexpected illness in the family.
Another mistake people make about this topic is to think that bankruptcy erases all debt obligations, that’s not the case. What would still need to be paid and how much will depend on the type of bankruptcy they file. Also, keep in mind that there are other types of specific bankruptcies. 7, 11, and 13 are just the most common.
This type of bankruptcy, the trustee can liquidate certain assets to pay off some of your debt. Most assets are probably exempt, but it will depend on the state, financial situation, and asset if it is deemed “essential.” People have to meet specific eligibility requirements for chapter 7, and income is the critical one, people need to have little to no disposable income for this type.
This type is for people that expect to pay off their debts within five years or less while keeping their assets. To qualify for this, your secured debts can’t be over $1,184,200, and your unsecured debts cannot be over $394,725.
This option is close to chapter 13, but it’s reserved for businesses. Businesses can also file for chapter 7 bankruptcy, but as we have seen, that means the liquidation of assets. With this type of bankruptcy, companies can keep their assets while continuing their operations, with a plan to pay off some of their debt, or get it forgiven in due time.
If you have overwhelming debt and want to know how bankruptcy can give you a fresh financial start, contact a Dallas bankruptcy attorney.