We all like choices. We like to choose different kinds of foods, different kinds of pets, and different kinds of homes and cars. If you are in a financial crisis, you also may want several bankruptcy choices. What type of bankruptcy you should choose will depend on your financial situation.
There are three different bankruptcies a business or an individual can use to protect themselves from various creditors.
- Chapter 7 Bankruptcy, commonly a “liquidation bankruptcy”, is the simplest and quickest
form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A trustee is appointed by the court to gather and sell your non-exempt property, and he will use the proceeds from the sale in order to pay your creditors. Most Chapter 7 bankruptcy cases are “no-asset” cases, and the debtor will not have assets for the trustee to sell.
- Chapter 13 Bankruptcy, known as the wage earner’s plan, is the second bankruptcy
available to individuals. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over a three to five year period. If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years, unless the court approves a longer period “for cause”. If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. Payments may not ever exceed a period longer than five years. During the plan, creditors may not start or continue collection proceedings against the debtor.
- Chapter 11 Bankruptcy, used primarily for business bankruptcies, is similar to Chapter 13
Bankruptcy but allows the trustee to run the daily business operations of the business. In Chapter 11 Bankruptcy, unless a separate trustee is appointed for cause, the debtor, as debtor in possession, acts as trustee of the business.
The type of bankruptcy you can file may be determined by you or may, under some conditions, be determined by law. Filers who wish to file Chapter 7 Bankruptcy must first pass the Means Test. Debtors whose income is below the state’s median income are not subject to the means test.
A Means Test calculator is provided to the debtors who are above the median income in their state, and it includes a formula designed to keep filers with higher incomes from filing for Chapter 7 bankruptcy. Although a complicated formula, the bankruptcy means test is rather generous and many debtors have no trouble meeting its requirements.
Debtors who cannot pass the Means Test will be required by law to file Chapter 13 Bankruptcy. Business proprietors, if they qualify, can choose to file any of the three types of bankruptcy choices, but they may be limited in their ability to file Chapter 11 Bankruptcy.
Contact a bankruptcy lawyer to determine what type of bankruptcy is right for you. If you need relief from the stress of debt and you live in or around the metropolitan area of Toledo, Ohio, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who can answer your bankruptcy questions.
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