Differences Between Chapter 7, Chapter 11 and Chapter 13 Bankruptcy

Sometimes, no matter how careful we are, debt piles up and we find ourselves unable to get out from underneath. Whether it’s the result of a global pandemic or a shakeup in our personal and professional lives, debt can snowball.In many cases, filing for bankruptcy is the only way a person or a business can break the cycle and start fresh.Understanding the differences between Chapter 7, Chapter 11 and Chapter 13 bankruptcy is important—not everyone will qualify for each type, and depending on which type you file, you may be able to keep more assets instead of having to sell off everything you own. Read this overview of bankruptcy filings, then contact a skilled bankruptcy lawyer in Park Hills, MO for help.

Chapter 7

Chapter 7 is a liquidation bankruptcy proceeding, which can be filed by both individuals and businesses (so long as they have assets they can liquidate to pay off their creditors). In order to qualify, you must pass your state’s “means test” to ensure that you’re truly unable to pay back your debt.

Chapter 7

is often referred to as “straight bankruptcy,” meaning that you file for bankruptcy, liquidate your assets and give that money to the bankruptcy trustee to pay off your creditors. Usually, what you pay is a significantly discounted rate from what you actually owed—the courts and creditors figure that getting some money back is better than nothing at all.

After you file, all calls from creditors should stop until you meet with the bankruptcy trustee and follow the process. After liquidation, your debt is considered discharged and you’re free to start anew. If you think you might qualify for Chapter 7, talk to a Chapter 7 bankruptcy lawyer in Park Hills, MO today.

Chapter 11

Chapter 11 is usually reserved for businesses, not individuals—although in certain cases, individuals can file under Chapter 11.This involves reorganizing and restructuring your debts into certain classes—for example, unsecured debts are in a class of their own. You work with the bankruptcy trustee to form a reorganization plan, which can take four to 18 months depending on any necessary extensions.

The reorganization plan must be for the benefit of the creditors, not the company, and certain creditors may receive repayment priority over others.

Chapter 13

Chapter 13 bankruptcy is often used by individuals, although businesses may choose to file under this statute too. Here, the debtor works with the trustee to form a repayment plan that will repay their creditors, usually over a course of three to five years. This allows you to keep certain assets like your home or car (but if you fail to make those payments, those can be repossessed, even during bankruptcy). Chapter 13 gives you the opportunity to make affordable payments

toward your debt, which often includes a significant discount to the total amount—but it’s crucial that you never miss a payment, or your entire case could be dismissed, leaving you on the hook for the full amount.Talking to a Chapter 7 or Chapter 13 bankruptcy lawyer in Park Hills, MO is easy—call Maynard & Joyce, LLC for a consultation today