Several types of bankruptcy are available to individuals and businesses in the United States. The most common types are Chapter 7, Chapter 11, and Chapter 13. Each type of bankruptcy has its eligibility requirements, benefits, and drawbacks. Here are the different types of bankruptcy that will help you determine which one may best fit your Bankruptcy in Orlando.
1.Chapter 7 bankruptcy
It is also known as “liquidation” bankruptcy, the most commonly filed type. It allows individuals and businesses to discharge (eliminate) certain types of debt, such as credit card debt, medical bills, and personal loans. A person must pass a means test to be qualified for chapter 7 bankruptcy. If their income is below the median, they are eligible for Chapter 7. Businesses, however, are not subject to the means test.
Once a Chapter 7 bankruptcy is filed, a court-appointed trustee takes control of the debtor’s assets and sells them to pay off creditors. However, certain types of assets, such as primary residence and personal belongings, may be protected under state or federal exemptions. After the assets are sold and the creditors are paid, the remaining debt is discharged. The entire process typically takes around four to six months.
2.Chapter 11 bankruptcy
It is another type of bankruptcy available to individuals and businesses. Unlike Chapter 7, which is designed for individuals with limited assets, Chapter 11 is intended for businesses and individuals with substantial assets and income. In a Chapter 11 bankruptcy, the debtor is allowed to keep their assets and continue operating their business. Instead of selling assets to pay off creditors, the debtor proposes a reorganization plan to the court, which outlines how they plan to pay off their debts over time. Once the plan is approved, the debtor can continue operating their business while paying creditors.
3.Chapter 13 bankruptcy
It is a type of bankruptcy available only to individuals, not businesses. It is often referred to as “wage earner’s bankruptcy.” In a Chapter 13 bankruptcy, the debtor proposes a reorganization plan to the court, similar to a Chapter 11 bankruptcy. However, the plan must be completed within a three-to-five-year period. The debtor must have a regular income, their unsecured debt must be less than $419,275, and secured debt must be less than $1,257,850. Under the plan, the debtor makes payments to the court-appointed trustee, who then distributes the money to creditors. After the plan is completed, any remaining debt is discharged.
