15 Bankruptcy Facts You Need To Know Before You File

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Filing for bankruptcy is a step you may not be able to avoid. Perhaps your debts have gotten out of control, or maybe your business is no longer profitable. Whatever the reason is, you need to choose the right kind of bankruptcy for you. Here are 15 facts about Chapter 7, 11, and 13 bankruptcy, so you can make a better choice. 

What Is Chapter 7 Bankruptcy?

When you consider bankruptcy, this is the type you're probably thinking of. With a chapter 7 bankruptcy you:

1. Liquidate your assets to pay back debts. 
2. Work with an appointed trustee to work out a debt repayment plan.
3. May have a regular income that can be used to pay your debts.
4. May settle out of court if you can come to a settlement agreement with your creditors. 
5. Are entitled to an automatic injunction, which stops creditors from harassing you. 

What Is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy is different than 7 and 13 because it treats the debtor as a separate entity. That means that you are recognized as a debtor on your own right, which won't drag a separate business or business partner into the proceedings. 

Chapter 11 bankruptcy:

1. Is better known as reorganization bankruptcy. Most commonly used for businesses, it allows businesses time to reorganize finances, income, and outgoing costs to emerge profitable following the bankruptcy.
2. Allows a business to continue to run while paying back debts. 
3. Provides a stay against liquidation, preventing your assets from being sold to pay back your debts. 
4. Results in most businesses (when applicable) being removed from stock exchange. This won't eliminate the stock value unless the business has to move into Chapter 7 bankruptcy. 
5. Typically only affects the business, not the personal finances of the owner, as he or she is a separate entity. 

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is another kind you can choose as an individual. It has several benefits, including:

• Preventing harassment from creditors.
• Allowing you between three and five years to pay back your debts.
• Preventing foreclosure or repossession of your home or vehicle.
• Allowing you to create a payment plan that works for your income level. 
• Forgiving any additional unsecured debt after the plan is completed. 

Deciding to enter bankruptcy is a choice you may never have wanted to make, but by knowing which type is best for your situation, you can make the right choice for your situation. With the right help, your future can be financially stable. Contact Wiesner & Frackowiak, LC for more information.

13 February 2015