Filing bankruptcy is a very difficult decision for most people. After making the decision, you have to decide what chapter of bankruptcy to file. Each chapter is a bit different than the others, and if you do not file the correct one for your situation, the courts might deny your bankruptcy.
Here is a look at each chapter.
Chapter 7 is the type of bankruptcy you hear the most about. People sometimes call it a fresh start bankruptcy because it allows you to sell all of the property that is not under the exemption clause to pay off your debts with the proceeds.
Some of the exemptions are:
- Retirement accounts
- Your home
- Your car
- Some personal property
- Certain valuables
You can usually keep absolutely essential things. These are normally items and property necessary for you to live and continue to work.
You see Chapter 11 in businesses and when you own a business. Although you can continue to operate your business, as usual, you will have to abide by a repayment plan that you and your creditors agree to.
Chapter 12 is similar to Chapter 13, but only if you are a family farmer or fisherman.
Chapter 13 is usually a part of a debt settlement plan. It provides you with a repayment plan without having to sell your personal property. The time to repay is often between three and five years.
No one chapter is better than the others; ultimately, you will need to choose the one that is right for you and your situation.