Not all bankruptcy filings are created equal. When deciding to file for bankruptcy, an individual needs to know which type of bankruptcy filing is right for him.
A Chapter 7 bankruptcy is the simplest and fastest form of bankruptcy. It is available to individuals and businesses alike, and is the most common type of bankruptcy in the United States. In a Chapter 7, the debtor’s property is liquidated, or sold off, with the proceeds going to the creditors. Chapter 7 debtors are allowed to retain possession of certain “exempt,” property. In California, most people filing for bankruptcy are able to retain all their property through proper exemptions.
A Chapter 11 bankruptcy is primarily used by businesses, but under the right circumstances, may also be available to individuals. Unlike Chapter 7’s liquidation based approach, a Chapter 11 focuses on reorganization. A Chapter 11 bankruptcy allows the debtor to remain in control of his or her assets and business operations, subject to the bankruptcy court’s oversight and jurisdiction, ensuring that the debtor follows his reorganization and repayment plan.
A Chapter 13 bankruptcy is similar to a Chapter 11, but is available to individuals only. For individuals with regular income, a Chapter 13 may be the right choice as it allows the individual to retain his property while paying off his debts over time. Also, Chapter 13 is much simpler and less expensive than Chapter 11.
Choosing the right form of bankruptcy makes a huge difference in mitigating costs and minimizing stress. If you are contemplating filing for bankruptcy, an experienced bankruptcy attorney can help you understand your options and determine which type of bankruptcy best fits your situation.