Understanding the different forms of bankruptcy
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There are different forms of bankruptcy that can provide the best option for individuals and businesses with overwhelming debt. Chapter 7 bankruptcy provides the most relief by dissolving almost all debts. Chapter 13 bankruptcy requires repaying a percentage of debts over a 3-5 year payment plan, after which any remaining debt is erased. Chapter 11 bankruptcy allows businesses to reorganize their debt structure and continue operations while obtaining court protection, making it a preferable option for most companies compared to Chapter 7 liquidation.
Understanding the different forms of bankruptcy
- 1. Leonard Sawyerr: Understanding the Different Forms of Bankruptcy For attorney Leonard Sawyerr’s clients, filing for bankruptcy protection is sometimes a favorable option that allows them to push the reset button on their finances. However, with several options for filing, individuals with overwhelming debt often turn to professionals, such as Leonard Sawyer, for help in determining which type of filing would be most beneficial. For consumers, Chapter 7 bankruptcy provides for the most dramatic reformation. Known as liquidation bankruptcy, or straight bankruptcy, almost all debts are dissolved. The only remaining obligations are usually student loan balances, taxes, and any loan collateral the borrower wishes to retain, such as a car or home mortgage. In Chapter 13 bankruptcy, the individual agrees to pay a percentage of their debts over the course of a three-year or five-year payment plan. After completion of the payments, any remaining debt is subsequently erased. Companies most often use Chapter 11 bankruptcy, as it allows them to reorganize their debt and continue their daily operations. In Chapter 13, the business is not allowed to reorganize, while Chapter 7 forces a halt to all transactions, so often Chapter 11 allows the flexibility to move forward while also obtaining court protection for debts.