Considering filing bankruptcy? Know the different types of Bankruptcy

Unexpected events may have hindered loan or credit card payments. If you want to eliminate debt and start over financially, consider bankruptcy. What are the types of bankruptcy? Can I file bankruptcy? When considering ways to avoid losing your hard-earned possessions to creditors, several questions may come to mind.

Sometimes bankruptcy seems like the only option. Even though you may feel imprisoned and terrified, bankruptcy is a serious decision. Understand bankruptcy and its several types to make the best decision for your situation.

If you’re in over your head in debt, let Northwest Debt Relief Law Firm help. We are a different kind of Law Firm where our clients get the complete legal services they deserve. Since we believe everyone deserves a fresh start, we will do our utmost to help you restore financial control. Our Portland, OR, bankruptcy lawyers always strive for the best results. Schedule a free debt consultation now!

What is Bankruptcy?

Bankruptcy helps people and corporations get out of debt. Federal courts manage it under the US Bankruptcy Code. Chapter 7 of the Bankruptcy Code serves as a classification for bankruptcy.

Bankruptcy can eliminate or restructure debt. The debtor petitions the bankruptcy court to start a bankruptcy case. Individuals, spouses, corporations, and other entities can petition.

What are the eligibility requirements for filing for Bankruptcy?

To be eligible for bankruptcy, there are certain requirements that must be met, which vary depending on the type of bankruptcy being filed. Here are some of the general eligibility requirements for filing for bankruptcy:

  • You must be a natural person, a partnership, or a corporation or other business entity.
  • You must have property in the United States or a permanent residence or business here.
  • You must not have filed for bankruptcy within a certain period, which varies depending on the type of bankruptcy.
  • You must not be attempting to defraud creditors.
  • You must complete credit counseling with an approved credit counseling agency, either in an individual or group briefing, within 180 days before filing.
  • You must meet certain income guidelines before being able to move forward with the process.
  • If you are filing for Chapter 7 bankruptcy, you must pass the “means test” to determine your disposable income. If your income is less than or equal to the median, the law presumes that you are eligible for Chapter 7 bankruptcy. If your income is higher than the median, however, you may still be eligible for Chapter 13 bankruptcy.
  • Your unsecured debts (such as credit cards and medical bills) must be less than a certain amount, which varies depending on the type of bankruptcy.

What are the Types of Bankruptcy?

The U.S. Bankruptcy Code governs all bankruptcy matters in federal courts. It categorizes bankruptcy types by chapter.

  1. Chapter 7: A type of bankruptcy designed for people and corporations with few assets and sources of income. A trustee appointed by the court sells non-exempt assets in this kind of bankruptcy to pay creditors. The filer may be ineligible for Chapter 7 bankruptcy if their income falls above a certain level. The Means Test and Income Limits for Chapter 7 can determine eligibility.

    A bankruptcy court can legitimately erase most unsecured debt, including credit card debt, medical expenses, and personal loans, in Chapter 7 bankruptcy. It is the fastest, easiest, and most common type of bankruptcy.

  2. Chapter 11: Chapter 11 “reorganization” bankruptcy permits firms and individuals to rearrange their debts and assets while continuing operations. Chapter 11 bankruptcy is available to all businesses—corporations, partnerships, and sole proprietorships—and people, but corporations utilize it most often.

  3. Chapter 13: It is a bankruptcy for people with steady incomes, who have enough extra money to design a repayment plan to pay off their debts. It can be paid partially or fully over a three- to five-year period. While the debtor keeps their assets, they are still required to repay creditors according to the court-approved repayment plan.

    This type of bankruptcy is ideal for people who are behind on secured debts but want to retain the collateral. To take advantage of this program, debtors must meet a few qualifications.

  1. Chapter 12: Chapter 12 covers regular annual income for family farmers and fishermen. This bankruptcy lets them create and implement a repayment plan. In Chapter 12, the debtor suggests a three- to five-year payback schedule.

  2. Chapter 9: Chapter 9 bankruptcy is a type of bankruptcy that applies specifically to municipalities, such as cities, counties, townships, municipal utilities, taxing districts, and school districts. It provides financially distressed municipalities with protection from creditors by creating a plan between the municipality and its creditors to resolve the outstanding debt.

  3. Chapter 15: Chapter 15 bankruptcy, established in 2005, allows U.S. courts to cooperate with international courts in foreign bankruptcy procedures involving U.S. financial interests. It addresses cross-border insolvency matters and promotes cooperation between foreign courts, representatives, debtors, and creditors. Chapter 15 bankruptcy is based on the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law (UNCITRAL).

How do I file for Bankruptcy?

Consult a bankruptcy attorney or credit counseling service before filing for bankruptcy, as it can be complicated. However, the bankruptcy process is as follows:

  • Consider all your options: It’s crucial to consider all your options before filing for bankruptcy.
  • Choose the type of bankruptcy filing: Choose your bankruptcy chapter. Chapter 7 is for those who wish to erase their debts, whereas Chapter 13 is for those with a regular income who want to repay.
  • Complete credit counseling: Credit counseling from an approved provider is usually required before bankruptcy. This course covers budgeting, credit, and bankruptcy alternatives.
  • Fill out bankruptcy forms: Bankruptcy courts require petitions, schedules, and statements. These forms disclose your assets, obligations, income, and expenses.
  • File bankruptcy forms in court: Your local bankruptcy court must receive the completed forms. Some filing fees may be waived or paid in installments.
  • Attend the meeting of creditors: Attend a 341 meeting of creditors after filing. This gathering lets creditors and trustees ask financial inquiries.
  • Follow the court’s instructions: You must follow the court’s orders, present needed documents, and work with your trustee during bankruptcy.

Consult our bankruptcy attorneys today!

For more information about the advantages and disadvantages of each bankruptcy chapter and how they may affect your business or your personal estate, you should consult with a lawyer who specializes in this field. A specialist will help you make the best decision based on your requirements.

We at Northwest Debt Relief Law Firm offer a thorough and highly-tailored answer to your debt issues. Our Portland, Oregon, bankruptcy lawyers are committed to giving you the best outcomes possible. We also provide legal assistance in rebuilding your credit score after bankruptcy. Speak with our bankruptcy lawyer in Oregon right away to have peace of mind!

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