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What Are The Different Chapters of Bankruptcy?

Most people are unaware that there are four chapters of bankruptcy that a person can file. What are the different chapters of bankruptcy? We will provide an overview of the different chapters of bankruptcy.

There are four primary chapters in bankruptcy–chapter 7, chapter 11, chapter 12, and chapter 13.  Each chapter is designed to satisfy different needs and has different qualifications.  This article will provide a basic overview of each chapter of bankruptcy.  More emphasis will be given to chapter 7 and chapter 13 bankruptcies as these are the most common for individuals.

Lehi Chapter 7 Bankruptcy

Lehi chapter 7 bankruptcy is the most common form of bankruptcy for individuals. In a chapter 7, you will self-appraise all of your assets. Applying bankruptcy exemption rules your assets will be divided into two groups: exempt assets and non-exempt assets.  Exempt assets are the assets that cannot be taken from you.  The debtor will potentially trade the non-exempt property in exchange for a discharge of your debts.  Because the debtor potentially surrenders non-exempt property, chapter 7 is often called a “liquidation”.  Chapter 7 is best suited for people who have little to no non-exempt property.

Chapter 11

Chapter 11 bankruptcy is designed for high wealth or high asset individuals (millionaires) and businesses.  Individuals that possess to much income, secured debt or unsecured debt may be forced to file chapter 11 instead of chapters 7 or 13.  Chapter 11 allows the debtor to restructure its debts with its creditors.

Chapter 12

Chapter 12 bankruptcy is similar to chapter 13 bankruptcy, but it specifically designed for farmers and fisherman.  To qualify for chapter 12, the debtor’s primary income source must be from farming or fishing.  Chapter 12 allows the debtor to create a plan to restructure its debts with its creditors.

Lehi Chapter 13 Bankruptcy

Lehi Chapter 13 bankruptcy is a debt consolidation and partial repayment of debts based upon the “disposable” income of the debtor.  In a chapter 13, the debtors necessary expenses are subtracted from its income to calculate the debtor’s disposable income. The debtor then contributes his or her disposable income monthly to repay creditors for a period of 3 to 5 years.  Debts that are not completely paid after satisfaction of the plan are then discharged.  Chapter 13 provides several mechanisms for the debtor to restructure debt with creditors such as cram-downs and lien strips making it preferred to debtors to stop foreclosure and property with negative equity.

Determining the appropriate chapter requires in-depth knowledge of your income, assets, liabilities and the bankruptcy code.  If you are considering, our experienced Lehi bankruptcy attorney can help you determine which chapter is best suited for your circumstances.  Schedule a free initial consultation today.

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