Bankruptcy is a scary word, but for many people in dire financial straits due to insurmountable debt, losses, or other unfortunate circumstances, it’s the first step to a fresh start. If you find yourself needing a Rockville bankruptcy lawyer to help you with the process, it will likely be for a Chapter 7, Chapter 11, or Chapter 13 bankruptcy. Here are the main attributes of each, and the differences between them.
Chapter 7 bankruptcies are known as liquidation bankruptcies. A court-appointed trustee will analyze your assets. Assets that are exempt are kept by the debtor. These usually include vehicles, clothing, appliances, household goods, and pensions/retirement accounts. Non-exempt items like collections, additional vehicles, or heirlooms may be sold to make up some of the debt.
Chapter 11 bankruptcies are generally business-related and are also known as larger reorganization bankruptcies. This means that the debt involved can be consolidated into different accounts and repayment plans, and eventually paid off, often at a negotiated discount.
Chapter 13 bankruptcies are also reorganization bankruptcies, but the debt in question is personal, as opposed to business-related as it is with Chapter 11. Most cases of personal bankruptcy are either Chapter 7 or Chapter 13. Just as with Chapter 11, under Chapter 13 the debtor works with a trustee to reorganize, consolidate, and repay a significant portion of their debt. This is generally set up for a term of three to five years. The advantage to Chapter 13 versus Chapter 7, is that it is easier to rebuild credit after filing for Chapter 13 since the debtor has demonstrated responsibility in paying back the restructured sum.
Bankruptcy is not the end of the world. Systems are in place to help Bankrupt individuals emerge from debt. If you are considering bankruptcy, work with a professional to determine which form is right for you.