There are a lot of people that have no idea what it means to file bankruptcy. Though filing for bankruptcy sounds like a scary and drastic move to many people, it’s actually quite common and strategic. In 2013 alone, the U.S. saw approximately 1,071,932 bankruptcies filed.
If you’re in desperate need of bankruptcy help or want to know when to file for bankruptcy, the best thing to do is contact an expert, like the St. Louis bankruptcy lawyers at the Law Office of Charles H. Huber. They can help you take the steps you need to correct your finances.
However, most people don’t even know that there are different types of bankruptcy. How can you file if you don’t even know the differences between chapter 7 bankruptcy, chapter 11 bankruptcy, and chapter 13 bankruptcy?
Here’s what you should know.
- Type of Debt: The first and major difference between the different types of bankruptcies is in the type of debt each chapter is used for. Chapter 7 bankruptcy, also known as “straight” bankruptcy, is used by personal debtors for unsecured debts. These are things like credit card debt and personal loans. At least in the United States, chapter 7 bankruptcy is the most commonly filed. Of the some 1 million total bankruptcies filed for in 2013 in the U.S., 728,833 were chapter 7 bankruptcies.
Chapter 11 bankruptcy is the most complex and is usually used by businesses or organizations to restructure debts. There were only 8,980 of these filed in 2013. Chapter 13 bankruptcy is used by individuals who still have a regular income still and can setup a repayment plan that will have their debt paid off within five years.
- Recovery Time: Chapter 7 bankruptcy is generally considered the fastest of the three. It can be filed for and completed in just a few months in many cases. Chapter 13 usually lasts three, but has a maximum limit of five years. Chapter 11 has no time limit and because of its complexities, it can drag on for years.
- Retention of Assets and Costs: Even though it’s the quickest and initially cheapest, Chapter 7 bankruptcy leaves open the possibility of more assets to be seized than the other two options. Chapter 11 and 13 allow for more flexibility with catching up on missed payments.
Whether it’s the result of unexpected medical bills, a risky financial investment gone wrong, or the complete flop of a business you own, bankruptcy is a relatively normal function of society and should be utilized to your fullest advantage in times of need. For personalized help, call our offices today.