Bankruptcy Basics Week One: What are the different types of Bankruptcy?

Chapter 7 is what most people think of when they think of bankruptcy. It’s often referred to as straight bankruptcy and allows you to seek discharge of most unsecured debts (such as credit card, medical bills and utility expenses).

Chapter 13 is a reorganization form of bankruptcy that is intended to address debts that Chapter 7 does not address through a structured repayment plan. For example, Chapter 13 can help you catch up on missed mortgage payments over time, restructure car loans, and repay non-dischargeable income tax debt over a three to five year period of repayment.

Chapter 11 is a different form of reorganization bankruptcy that is primarily aimed at helping businesses but also helps individuals that have too much debt to qualify for Chapter 13 bankruptcy. It is incredibly complicated, time-consuming and we work to have our clients avoid filing it whenever possible. However, for businesses that are in very dire financial circumstances, it can provide the immediate relief that is needed to give the business time to come up with a plan to address its debts.

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