There are three principle types of bankruptcy protection available for businesses and individuals, each with its own set of characteristics and qualifying criteria.
All bankruptcy protection grants a reprieve from harassing creditors, a halt to all lawsuits (including foreclosures), and a fair opportunity for financial assessment and strategy. Disadvantages include damage to credit history and possible liquidation of assets.
Chapter 7
Bankruptcy under Chapter 7 is best characterized as a “fresh start.” This type of bankruptcy gives businesses and individuals the opportunity to discharge past debts and avoid liability under court judgments.
Chapter 11
Chapter 11 is reorganization, as opposed to liquidation. This type of bankruptcy is typically utilized by businesses and high net worth individuals. The idea is to create a sustainable plan for repayment of debts.
Chapter 13
Chapter 13 also involves a plan for repayment of debts, and it is much more accessible than a Chapter 11. Just the same, not all debtors will qualify for Chapter 13 as they may lack the steady income necessary to fund a viable Chapter 13 plan.
