There are four types of bankruptcy that you should know about if you’re planning on filing one. Each type of bankruptcy has specific uniqueness, and knowing them will help you decide which type is the best to file in your case. Learn the ins and outs of each type, and consult a reputable Utah bankruptcy attorney for that critical first step towards financial freedom.
Bankruptcy under Chapter 7 of the Bankruptcy Code is the most common type filed in the United States. A person filing for this type of bankruptcy will have to sell off all non-exempt assets to pay off his debt. Although it is allowed for both individuals and businesses, the latter often avoid filing Chapter 7 bankruptcy because normal business operations will be interrupted.
The complex Chapter 11 bankruptcy type is the go-to for most businesses. Unlike Chapter 7, instead of selling off non-exempt assets, entities are required to submit a debt repayment plan to their creditors within 120 days after filing for bankruptcy. If an entity is not able to submit a plan within the designated time, creditors are then free to draw up their own plan to which the debtor must adhere to.
Chapter 13 bankruptcy is designed for individuals; businesses cannot technically file for this type of bankruptcy. Similar to Chapter 11, the court and creditors will have to approve a repayment plan submitted by the individual. Before an individual can file for Chapter 13 bankruptcy, however, he must show proof of regular income as a means to pay off the debt over a 3- to 5-year period.
Chapter 12 is mostly the same as Chapter 13, except it is available only to farmers. It is designed to allow a family to stay on their farm as they pay off their debt. Likewise, Chapter 13 is more preferable for farmers because it takes into account the seasonal and unpredictable nature of the agriculture industry. Although filing for bankruptcy sounds like an easy solution to debt, it should not be taken lightly. File for bankruptcy only after you’ve exhausted other methods to pay off your debt. You also need to consult a reliable Utah bankruptcy attorney like the ones at Lewis Adams and Associates to help you make the best decisions in this serious life-changing solution.