Choosing the type of bankruptcy for which to file is never an easy decision. Bankruptcy is difficult to face in the first place. Sometimes bankruptcy is not only inevitable, but may actually give you the capacity to economically survive your current demise. Even if your available solutions are unpleasant, they still present a transition to the future. It's important to decide which path best fits you. Though deciding which type of bankruptcy is right for you holds no an easy answer, it is the beginning of the solution.
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Chapter 7 Bankruptcy
This is the type of bankruptcy that liquidates your assets to pay your creditors. Some creditors may repossess your house or your car to pay back your current debt, though you may be allowed to keep your property in some cases. Chapter 7 is generally for people with little to no assets, and it allows them to have most of their debt discharged without losing too much. Individuals with a lot of assets to lose may want to consider Chapter 13 bankruptcy instead, as this allows you to maintain your assets in most circumstances.
Chapter 11 Bankruptcy
This type is used by businesses as a way to restructure their debt without losing their company. Filing this type allows a business to continue its operations throughout bankruptcy proceedings. Once Chapter 11 is filed, all creditors efforts to recover the debt must cease. This is to allow businesses to form a plan in which to deal with the debt. Creditors can contest this plan if they feel they'd have more to gain through liquidation, but the decision ultimately rests with a bankruptcy judge who prepares a prepayment plan according to his or her discretion.
Chapter 13 Bankruptcy
This option provides an individual with an opportunity to pay back owed debt without losing any assets. You are responsible for filing a repayment plan, but creditors can challenge it and the decision ultimately rests in the fate of a judge. In the end, the plan needs to work towards the best interests of your creditors. If they would fare better under a Chapter 7 liquidation, your petition will likely be denied.
Bankruptcy is a serious step to solving serious financial problems. Always consult a bankruptcy lawyer to thoroughly understand the complexities involved and determine the option that's in your best interests.
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